Although soldiers and civilians alike struggle with bank overdraft fees, some banks that market to the military are top collectors of these fees in the United States. A Wall Street Journal analysis found that four banks with on-base branches, including Fort Hood National Bank and Armed Forces Bank, were among the top U.S. banks in terms of service-charge income as a percentage of deposits in the 12 months that ended Sept. 30.
Overdraft programs can help customers avoid bounced-check fees, but critics say they are comparable to high-interest, short-term loans. Because the Pentagon considers soldiers' debts to be a significant morale and readiness issue, the Military Lending Act limited the annual percentage rate to 36 percent for many payday-style loans to military members. Since then, overdraft programs have taken over payday loans as the leading financial problem among soldiers, says Adm. Abbot of the Navy-Marine relief society.
Eric Reid, director of the U.S. Army Financial Management Command, pointed out that military banks are more reliant on fee income than civilian banks because they do fewer mortgages or commercial loans. “The real heart of the issue” is getting financial education to soldiers, he says. Consumer groups such as the Center for Responsible Lending argue that overdraft loans at military banks should be subject to the 36 percent rate cap, since overdrafts “extend credit to service members at abusive rates and terms that mirror payday loans,” the groups said in an August letter to Defense Secretary Chuck Hagel.