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25 Feb 2012
Bank target the vunerable with high bank fees. Bank target the vunerable with high bank fees.

Colorado Debt Relief Needed Because Banks Target Vulnerable

Banks continue to reach into consumers' pockets for anything they can, regardless of whether it is going to require people to seek debt relief in Colorado or elsewhere as a result.

Now, Southern Colorado debt relief attorneys are somewhat encouraged to hear of an announcement made by the U.S. Consumer Bureau chief, who says the agency plans to go after banks for their outrageous overdraft protection fees.

Chief Richard Cordray, who recently took over the post, said the agency is also going to be asking for thoughts from the general public on how these fees are worded on checking account statements.

Cordray was quoted by CNN Money as saying that the way banks initiate overdraft fees has resulted in severe financial harm to people who are often the least able to afford it.

Banks have tried to defend themselves by saying the overdraft fees are put in place to spare their customers from being embarrassed when a purchase is denied because there isn't enough money in their account. But when that transaction is completed, the person is hit with penalty fees that generally range between $30 and $35  - sometimes for a purchase that may be just a few dollars. The example given was when a $3 cup of coffee becomes a $40 cup of coffee, due to overdraft fees.

Recent research by the Federal Insurance Corp. determined that in 2008, people who overdrew their accounts more than 20 times annually paid more than $1,600 in overdraft penalties. This is especially alarming when you consider that someone who is likely to overdraw their account that many times is probably someone who is struggling with debt in Denver or elsewhere.

That report spurred action that caused the banks to ask whether customers actually want overdraft protection - instead of signing them up automatically - but banks can still automatically enroll people for overdraft protection for online bills.

Another aspect that the bureau intends to look at is the common bank practice of clearing large purchases before smaller ones. This is a banking strategy that makes it more likely that a customer will overdraft on several smaller purchases - triggering even more fees.

The final part of the bureau's investigation is going to focus on why so many of these fees come down especially hard on younger and low-income consumers. In fact, nearly 47 percent of younger bank customers were at some point slammed with overdraft fees. Of those, more than 15 percent had higher than 10 overdrafts annually.

Stephen H. Swift

Managing Attorney
Law Office of Stephen H. Swift, P.C.

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