Center for Responsible Lending.

Some of you will read this quote and think, “What dumb Americans running up so many overdrafts.” This is the wrong lesson.

Can overdraft fees be avoided if you’re careful? Usually. Should the banks charge excessive and unearned fees to customers that aren’t particularly financially savvy? No. If a customer has social security payments directly deposited into an account every month, the chance that the customer won’t be good for a $15 overdraft are negligible—and charging a $32 fee every day for that overdraft is simply predatory. There is next to no risk. The whole process is automated—so there is no actual labor involved. And, if the bank decided the risk was too high, it could reject the transaction at an ATM or Point of Sale.

The bank could deny the purchase that caused the overdraft. It could charge interest at a reasonable rate on overdrafts. It could even reject debit card transactions if there are insufficient funds to cover it. But that’s not profitable enough.

Of course, we’re not doing anything about it. Regulation? That would be communism! This is the kind of redistribution of wealth we like. Money is taken from people who can’t afford to lose it. Bank profits increase. Investors make a killing. The rich get richer.

(via squashed)