Banks: We'll make you pay for regulation

[RandomGuy]

Scratch pad

Feb 17, 2010 9:15 AM — Scott Jagow (http://www.publicradio.org/columns/marketplace/scratchpad/2010/02/banks_well_make_you_pay_for_re.html)

The banks are busy calculating how much financial regulation will cost them — I mean, you. Today, JP Morgan came out with a 184-page report that claims proposed changes to regulation will lead to a 33% increase in the price of all banking services.

The report says return on equity (ROE) for global banks would fall from 13.3% to 5.4% if all the US and European regulation proposals become law. More from the Financial Times (http://ftalphaville.ft.com/blog/2010/02/17/152026/bearing-the-cost-of-reformed-banks/):


The issue then is the extent to which banks can pass on the `cost’ of the regulatory hit to their customers. By JPM’s estimates, pricing on financial products would have to go up by 33 per cent for the bank sector ROE to get back to 13.3 per cent.

Do banks need a 13.3% return on equity for shareholders? Is that some kind of magic number? Well, no — but I’m assuming that figure comes from looking back at ROE during the banks’ healthier days. See bank ROE for this decade by quarter (http://www.economagic.com/em-cgi/data.exe/FDIC/RE-SI). Between 2000 and 2007, ROE consistently ranged between 12-15%. Since late 2007, commercial bank ROEs have ranged from -9% at the depth of the financial crisis to about 7%.

I’m sure the banks would like to get back to the good ole’ days. We’ll have more on ROE tonight on Marketplace.

If the ROE doesn’t scare Congress, JP Morgan hopes this will:


“The cumulative impact of all the proposed regulation suggests that there is a real risk that we may move from a system that was under regulated to one that is over regulated and that could cause a significant increase in lending costs and a negative impact on the economy.”


In other words: Stop what you’re doing at once. You will destroy the global economy. Hey, we should know. We have a particular talent in doing just that.
But on one of the 184 pages of this report, JP Morgan says no more Too Big To Fail:


“We believe big banks should be allowed to fail. We think stability in the financial system should be addressed by ensuring deposit insurance systems are stable and well funded, and by tackling directly the risks presented by the interconnectivity and potential contagion of the modern global banking system.”

Sounds like a call for regulation to me.

[Wild Cobra]

I wonder why people think regulations don't cost them?

[RandomGuy]

I wonder why people think regulations don't cost them?

For about the same reason that people like you don't realize you are paying for healthcare for the uninsured right now.

[Bartleby]

I wonder why people think regulations don't cost them?

I wonder why people think deregulation doesn't cost them.

[boutons_deux]

I wonder why people think Wall St deregulation, Banskters' Great Depression, predatory lenders, payday lenders, credit card issuers/rapists, etc, etc don't cost them?

[boutons_deux]

The financial sector is extorting the country in the face of proposed regulation is fucking criminal.

[nkdlunch]

don't fuck with Rockefeller

[TeyshaBlue]

Do banks need a 13.3% return on equity for shareholders? Is that some kind of magic number? Well, no — but I’m assuming that figure comes from looking back at ROE during the banks’ healthier days. See bank ROE for this decade by quarter (http://www.economagic.com/em-cgi/data.exe/FDIC/RE-SI). Between 2000 and 2007, ROE consistently ranged between 12-15%. Since late 2007, commercial bank ROEs have ranged from -9% at the depth of the financial crisis to about 7%.

I’m sure the banks would like to get back to the good ole’ days. We’ll have more on ROE tonight on Marketplace.

If the ROE doesn’t scare Congress, JP Morgan hopes this will:

to me.

So they had a better ROE figure than friggin Wal*Mart in 2007 and that's not good enough?
*sigh*

[CubanMustGo]

I wonder why people stupidly deal with banks when credit unions offer far superior rates and fee structures.

[coyotes_geek]

I wonder why people stupidly deal with banks when credit unions offer far superior rates and fee structures.

:tu

[Winehole23]

(...belongs to a credit union)

[EVAY]

I wonder why people think deregulation doesn't cost them.

+100

These scare tactics by the big banks and investment companies make me see red. How dare they suggest that the deregulation they exploited to the tune of gazillions of dollars in their own pockets didn't cost the American taxpayer and the American investor and the European investor and the Asian investor and all the other investors globally more than they have ever lost before, or could lose in the face of re-regulation. Crap!

And for Americans who take the knee jerk reaction that says " don't people know that regulations cost them money?"...have you forgotten how much the failure of deregulation cost all of us since 2007? I'll tell you how much it cost me...it cost me over 30% of my investment portfolio. So don't try to tell me that regulations are gonna cost me money. They cannot POSSIBLY cost more money than I have already lost at the altar of financial deregulation.

I will not live long enough to recoup my losses. But having said that, I'm not really hurting, because I was lucky enough to start from a point that I could sustain some losses. The people who have taken it on the chin are those who lost all, or virtually all, of their investments, watched the banks be bailed out by a Republican president and Republican Treasury Secretary, then watched them return to profitability within a year by borrowing money at zero interest from taxpayers and refusing to lend it out to small businesses and homeowners because they could get more 'profit' by putting it in virtually guaranteed returns and then give themselves monstrous bonuses in the ultimate 'Fuck You' gesture to everybody else in America.

Now, these same assholes have the unitigated gall to claim that they are going to be 'victimized' by oversight. If they were so worried about their investors as they now claim to be, they would never have over-leveraged themselves by a factor of 40 to one in order to develop and buy into derivatives of crap-based debt assets that they didn't understand and didn't care that they didn't understand.

These people are indefensible!

[EVAY]

For about the same reason that people like you don't realize you are paying for healthcare for the uninsured right now.

Thank you, random guy.

[Winehole23]

Now, these same assholes have the unitigated gall to claim that they are going to be 'victimized' by oversight. If they were so worried about their investors as they now claim to be, they would never have over-leveraged themselves by a factor of 40 to one in order to develop and buy into derivatives of crap-based debt assets that they didn't understand and didn't care that they didn't understand.Brazen, isn't it?

It just might work.

[EVAY]

Brazen, isn't it?

It just might work.

I'm afraid you're right. We seem to have most gutless wonders in the world representing us in the U.S. congress, and now, thanks to the SCOTUS, the banks can spend themselves into oblivion paying for ads against whoever in Congress doesn't carry their water on this issue. What's more, they will expense all those advertising dollars and cry that they have no profits because of the 'cost' of regulation!!!

Maybe Marcus has been right all along.

[spursncowboys]

Attention Attention
This just in.
The consumer will pay for the populist class war regulation and taxes.

[spursncowboys]

(...belongs to a credit union)

:toast

[DMX7]

I wonder why people think deregulation doesn't cost them.

This.

[angrydude]

more lies told by the banks to scare us away. Like has been mentioned, banks already cost us money. they've stolen 99 cents out of every dollar since the inception of the federal reserve.

[Wild Cobra]

For about the same reason that people like you don't realize you are paying for healthcare for the uninsured right now.
How can you possible derive that from my statements?

It's your own prejudice and closed mind making you believe that.

[Wild Cobra]

I wonder why people think deregulation doesn't cost them.
It depends on the type of regulations. Generally regulations cost consumers more. In this case, it's a cost that will be passed on to the consumers.

[Wild Cobra]

I wonder why people stupidly deal with banks when credit unions offer far superior rates and fee structures.

Good question. Never been happy with a bank, but I do like my Credit Union.

[exstatic]

I wonder why people stupidly deal with banks when credit unions offer far superior rates and fee structures.

This.

I think if the banks jack their rates to try to re-attain bubble rates of return, they'll fail in even greater numbers. Higher rates of return ALWAYS carry higher risks, whether it's the popping of the bubble du jour or the mass exodus of your customer base.

[coyotes_geek]

more lies told by the banks to scare us away. Like has been mentioned, banks already cost us money. they've stolen 99 cents out of every dollar since the inception of the federal reserve.

Yes it's meant to scare us away, but no, it is absolutely not a lie. Any costs will be passed along.

[Supergirl]

You know what? If everyone pulled their money out of the big banks that behaved recklessly for their own greed -- that is Wells Fargo, Citibank, Bank of America, etc -- all at once, THAT would send a powerful message.

I bank with a local community bank that didn't make any high risk housing loans and provides a lot of loans to support small business owners in my community. They don't charge me any fees and they provide whatever the going rate for interest is. It's time we as consumers dump the big bank assholes once and for all.

[DarrinS]

There's a very simple solution to this.


Have the benevolent US govt take over the banking industry and create one giant beurocratic clusterfark.


Then, the US can take money from their super slushy slush fund (our taxes) to run this thing toward the same destiny as all govt-run clusterfarks -- INSOLVENCY (see Social Security, Medicare, and the state of California).

[Wild Cobra]

You know what? If everyone pulled their money out of the big banks that behaved recklessly for their own greed -- that is Wells Fargo, Citibank, Bank of America, etc -- all at once, THAT would send a powerful message.

I bank with a local community bank that didn't make any high risk housing loans and provides a lot of loans to support small business owners in my community. They don't charge me any fees and they provide whatever the going rate for interest is. It's time we as consumers dump the big bank assholes once and for all.
If I recall, that's what caused the Great Depression... People taking their money out of banks, and stocks.

[coyotes_geek]

There's a very simple solution to this.


Have the benevolent US govt take over the banking industry and create one giant beurocratic clusterfark.


Then, the US can take money from their super slushy slush fund (our taxes) to run this thing toward the same destiny as all govt-run clusterfarks -- INSOLVENCY (see Social Security, Medicare, and the state of California).

Sadly, this is pretty close to what we're going to end up with. Instead of doing what should be done, breaking up the TBTF's, the benevolent US government is going to come up with a bunch of regulations. Regulations that will undoubtedly be heavily influenced by bank lobbyists and stand a great chance at becoming a bureacratic clusterfark. Instead of putting down the rabid dog that bit us, the government just wants to try and put it on a leash.

[SAGambler]

You know what? If everyone pulled their money out of the big banks that behaved recklessly for their own greed -- that is Wells Fargo, Citibank, Bank of America, etc -- all at once, THAT would send a powerful message.

I bank with a local community bank that didn't make any high risk housing loans and provides a lot of loans to support small business owners in my community. They don't charge me any fees and they provide whatever the going rate for interest is. It's time we as consumers dump the big bank assholes once and for all.

But they would fail....And Obama has already determined that "they are too big to fail', so we would just prop them up with more taxpayer money.

Must be nice to be too big to fail...Wish I could figure out how to get in that category.

[coyotes_geek]

But they would fail....And Obama has already determined that "they are too big to fail', so we would just prop them up with more taxpayer money.

Must be nice to be too big to fail...Wish I could figure out how to get in that category.

Campaign contributions.

[spursncowboys]

You know what? If everyone pulled their money out of the big banks that behaved recklessly for their own greed -- that is Wells Fargo, Citibank, Bank of America, etc -- all at once, THAT would send a powerful message.

I bank with a local community bank that didn't make any high risk housing loans and provides a lot of loans to support small business owners in my community. They don't charge me any fees and they provide whatever the going rate for interest is. It's time we as consumers dump the big bank assholes once and for all.

thats called a bank run and it would just mean they would get more govt money. That was the Fed's original reason for being created. They don't have your money physically available. You local bank is probably owned by a big one.

[ElNono]

Yeah, you don't want to go through a bank run. Ugly doesn't begin to describe it.
Plus your average joe doesn't even know we live in a fiat economy or understands the concept. The day he figures it out, he's gonna jump from a building.

[RandomGuy]

If I recall, that's what caused the Great Depression... People taking their money out of banks, and stocks.

Bank failures weren't caused by people moving from one back to another.

If I moved my money from one bank to anotehr bank because I liked the business better... that doesn't really affect the overall net banking system.

[RandomGuy]

You know what? If everyone pulled their money out of the big banks that behaved recklessly for their own greed -- that is Wells Fargo, Citibank, Bank of America, etc -- all at once, THAT would send a powerful message.

I bank with a local community bank that didn't make any high risk housing loans and provides a lot of loans to support small business owners in my community. They don't charge me any fees and they provide whatever the going rate for interest is. It's time we as consumers dump the big bank assholes once and for all.

http://www.huffingtonpost.com/2009/09/14/debtors-revolt-woman-refu_n_285394.html

Debtor's Revolt: Woman Refuses To Pay Off Bank Of America Credit Card (VIDEO)
First Posted: 09-14-09 10:30 AM | Updated: 01-19-10 03:11 PM
For years, Ann Minch of Red Bluff, Calif., has carried a balance of several thousand dollars on her Bank of America credit card, making minimum monthly payments of about $130, sometimes paying an extra $50 or $100. She says she's never missed a payment.

Bank of America rewarded her loyalty this year by repeatedly raising her interest rate, which reached 30 percent in July.

Fed up, the 46-year-old stepmother of two turned to YouTube.

"There comes a time when a person must be willing to sacrifice in order to take a stand for what's right," said Minch in a Sept. 8 webcam video. "Now, this is one of those times, and if I'm successful this will be the proverbial first shot fired in an American debtors' revolution against the usury and plunder perpetrated by the banking elite, the Federal Reserve and the federal government."

Minch announced that she'd be dumping Bank of America, refusing to pay off her credit card debt unless she was offered a lower rate. She explained that she'd been a reliable customer even though she'd lost her job as a mental health case manager. She said bank reps refused to negotiate her interest rate when she called them to complain a few weeks ago.

"You are evil, thieving bastards," she said in her video. "Stick that in your bailout pipe and smoke it."

The video made a splash online, getting links from all kinds of venues and garnering over 96,000 views as of Monday morning.

[Winehole23]

It was the mattress money that killed em, SnC.

[RandomGuy]

This bit rather recently also got pumped by Huffington on a national TV appearance:

http://moveyourmoney.info/find-a-bank

It lets you find a local bank or credit union to move your money to.

[RandomGuy]

http://redtape.msnbc.com/2010/01/the-how-and-why-of-switching-banks.html

THE HOW – AND WHY – OF SWITCHING BANKS

by Bob Sullivan

Arianna Huffington made waves recently when she went on national television calling on consumers to dump their big banks and deposit all their money into local, community banks. Huffington's site, HuffingtonPost.com, threw its weight behind a Web site designed to make breaking up with your bank a little easier -- MoveYourMoney.info. It includes a ZIP-code based locator to help consumers pick through the thousands of banks in the U.S. It even sports a short, cleverly edited video that juxtaposes the classic film “It's a Wonderful Life” with images from testy congressional hearings about the banking industry.
Driven largely by Huffington's media popularity, the site quickly gained traction. Huffington's appearances on MSNBC's Countdown and CNN's Larry King Live, among many others, had some observers calling MoveYourMoney a movement. One of Huffington's partners in the venture, Dennis Santiago of Institutional Risk Analytics, says visitors have searched for banks in more than 16,000 ZIP codes -- better than half the ZIP codes in the country.
It's far too early to tell if Huffington has done something that might genuinely take a bite out big banks -- real data probably won't be available for months. But Huffington is tapping into frustration that has been building since 2008 banking collapse and bailout, say advocates for credit unions and smaller, community banks.
"It has been developing for the last several months," said Bill Hampel, chief economist of the Credit Union National Association. "Annual growth in credit union members had been very weak for the past several years...but during the first 11 months of 2009, our growth rate doubled." Credit unions added 2 million new consumers during that stretch, Hampel said.




Karen Tyson, spokeswoman for the Independent Community Bankers Association, said her 5,000 member banks were experiencing similar, frustration-driven growth.
"Community banks have, since the onset of the financial crisis, gained new customers," she said.
The American banking system appears to provide seemingly endless alternatives.There are 8,000 banks and 7,600 federally insured credit unions, according to the American Bankers Association.

"The good news is people have choice," said Nessa Feddis, spokeswoman for the American Bankers Association. "There's lots of competition, and if people are dissatisfied they should look around and vote with their feet."
But most don't. A tiny group of large banks dominate. In 2009, four banks -- Citigroup, JPMorgan Chase, Bank of America and Wells Fargo -- held 39 percent of all deposits in FDIC-insured banks, according to Reuters.
The high concentration of account-holders -- combined with a low concentration of good will – certainly seems create the potential for a mass exodus. So why the need for a Huffington Post-prompted movement?
It turns out the breaking up with your bank is hard to do.
In 2008, the Federal Reserve published a study around what economists call "switching costs" -- the pain and suffering consumers must face when trying to leave one bank to join another. The results were disturbing. The study, by Fed senior economist Timothy Hannan, found it was incredibly difficult for consumers to get reliable information about the true costs of the new bank, for example, and described what a "bargains-then-rip-off" strategy to reel in customers and then exploit them.

The euphemistic name for the strategy is a “two-period” model. Period one is a free toaster. Period two is cascading overdraft fees.
Even worse, the true costs and fees levied on account holders may not even be available to consumers until they've committed to the new bank. In many cases, fee schedules aren’t listed on generic Web sites and can only be viewed by account holders after they’ve logged in – so there is literally no way to comparison shop.

“There may be some lack of transparency with regard to pricing,"acknowledged American Bankers Association chief economist Keith Leggett.
The switching costs become apparent when trying to extract your old bank's tentacles from your new financial life. Today, most consumers use their checking account for a dozen different activities -- direct deposit of payroll checks, automated online bill payment of mortgages and auto loans, recurring debit card transactions, automatic savings plan deductions, credit card bill payment and so on. Ending all these transactions, and starting the payments anew, is such a hassle that "inertia" often takes over, says Hampel.
"Changing where you have your checking account can be a royal pain in the neck," he said. "It's like if you lose a credit card and have to inform all those people you have a new one, only much worse than that."
To combat the switching cost problem, many credit unions have developed "switch kits" to grease the skids, including forms that help new consumers track the changes needed for all payments and deposits. Those may ease the pain a little, but ultimately getting a new bank means fighting through a lot of red tape.
Still, consumers should look past the hassle and find a bank or lending institution that suits their needs, says Leggett.
"Who you do banking with is very important. It may be the most important financial relationship of your life, so you should do your homework," he said.
Leggett welcomed the discussion about switching to smaller banks and credit unions started by the Huffington Post, but he cautioned consumers against a "knee-jerk" reaction to it.
"In not every case is a credit union better than a bank with regard to pricing or fee structure," he said, saying that credit unions have also been guilty of charging annoying fees, just like big banks. "People have to realize when looking for a financial provider that they should always shop around and find a provider who offers the appropriate level of convenience.
Smaller banks and credit unions, he warned, will not provide the same "product mix" as larger banks, and are less likely to offer benefits for using multiple products – such as free checks or discounted loans.
But credit unions provide obvious benefits – in the form of better interest rates, both on loans and deposits, said Hampel. According to Datatrac Corp., average credit union credit card rates are currently more than one full interest point lower, car loans are 1.5 percent lower, and one--year CD rates are 0.30 percent higher. (Banks currently enjoy a small edge over credit unions in mortgage rates.)

Meanwhile, community banks offer something big banks find nearly impossible to compete with -- local ownership and the ability to talk with a familiar face in the event of unexpected financial hardship, said Tyson of the community bankers group.

“They always put customer service first, and doing right by the community first. They will not give you a
loan purely to make a profit. And you’re not going to be just a number,” she said. “You’ll be able to walk in the door and you can find the bank president, and know that he lives in your community. … It's a different sort of a custoimer relationship.”
Like Huffington, Tyson sees the switching issue in a larger context. Federal law provides for a nationwide "concentration cap" of 10 percent, meaning no one bank can control more than 10 percent of the U.S. deposit market.
Because of the banking collapse and resulting consolidation – leaving four banks with nearly 40 percent of deposits -- the cap is currently being threatened, leaving the U.S. financial system concentrated in too few hands, Tyson said. Through its "Fix Too Big to Fail" marketing campaign, the community bankers group is lobbying Congress to lower the cap and force large banks to divest some of their holdings.
"The only way to change the dynamic is to have legislation in place that makes it not as appealing to be … large institutions," she said.

RED TAPE WRESTLING TIPS
Marketing campaign and blog-initiated movement aside, it’s always a good idea to review your financial relationships and see if you can get a better deal. Consumers interested in investigating a move away from big banks should know it takes a bit of work, but there’s plenty of help available online, and one or two lunch hours should do the trick. Here are some tips:
* Rates aren't everything, and people matter. Leggett points out that many consumers are far too concerned with the published interest rate they'll earn on savings and checking accounts, and sometimes pick banks based on small differences. Given that current rates are so low, earned interest should be of little concern at the moment; fee schedules are more significant. But even more important is the likelihood that the bank will treat you like a human being should anything go wrong; if, for example, you accidentally overdraw your account and land a series of overdraft fees. Will a familiar teller help you, or will you end up stuck on a long voice mail tree? We all make mistakes. It’s hard to put a price tag on the reassurance that you’ll be treated like a person, and not a criminal, when your turn comes.
* Don't forget the middle child. Feddis points out that there is middle ground between the four huge banks and thousands of small banks -- what she calls "medium-sized" institutions. They might offer the best of both worlds.
* Beat the feared late fee: The real fear over switching comes from the potential for a missed loan or credit card payment, or double payments that could lead to an overdraft. There are several ways to ease the transition between institutions, although all of them involve a little extra money.
The easiest thing to do is double up. Keep both accounts open and keep all your payments turned on until you can confirm that new payments have been received by the old payee. This will require having a lot of extra money to spare. A variation involves paying with your new account a full 10 days earlier, giving you time to cancel scheduled payments from your old account. You'll still need the extra money in case a payment lands in limbo. In either case, it's good to set up overdraft protection on both accounts by linking the checking account to a credit card, savings account or line of credit, so there's backup if you screw up.
The simplest – but most time-consuming -- method is to open the new account without closing the old one, and then switching one bill payment one month at a time to the new account, making sure each one is set up properly before switching the next one.
*If your credit card issuer has cut you off: Many consumers find they are losing available credit on their cards or losing their cards altogether. This hurts their credit score. Hampel said consumers thus spurned should still apply to a credit union for a new card and will likely get the account as long as their credit isn't severely damaged. Expect a lower credit limit than you're used to, however -- credit unions are much more stingy about credit card maximums. That's a good thing, Leggett says: that's partly why the bank credit credit card default rate is currently around 10 percent, while credit union rates are down near 2.5 percent.
*Finding an alternative. While credit unions have certain limitations on membership, Leggett says that virtually all U.S. adults are eligible to join at least a few credit unions. If you're stumped, try the credit union locator at


http://icba.org/consumer/BankLocator.cfm?sn.ItemNumber=51757

To find a small bank, try the bank locator

http://icba.org/consumer/BankLocator.cfm?sn.ItemNumber=51757

or use the Huffington Post tool, which lists only banks graded B or higher on Institutional Risk Analytics’ scale.

[boutons_deux]

http://graphics8.nytimes.com/images/misc/nytlogo153x23.gif (http://www.nytimes.com/)

http://graphics8.nytimes.com/ads/spacer.gif


February 23, 2010

Banks Apply Pressure to Keep Fees Rolling In

By ANDREW MARTIN (http://topics.nytimes.com/top/reference/timestopics/people/m/andrew_martin/index.html?inline=nyt-per) and RON LIEBER (http://topics.nytimes.com/top/reference/timestopics/people/l/ron_lieber/index.html?inline=nyt-per)

For many households trying to improve their finances, tossing out pitches from the bank has become almost automatic. But in recent weeks, Chase has been fanning special letters out to consumers with an offer that it urges them not to refuse.

“Your debit card may not work the same way anymore, even if you just made a deposit. Unless we hear from you,” the message, emblazoned in large red type, warns. “If you don’t contact us, your everyday debit card transactions that overdraw your account will not be authorized after August 15, 2010 — even in an emergency,” with “even in an emergency” underlined for emphasis.

As the government cracks down on the way banks (http://topics.nytimes.com/your-money/investments/brokerage-and-bank-accounts/index.html?inline=nyt-classifier) charge fees for overspending on debit cards, the industry is mounting an aggressive campaign aimed at keeping billions of dollars in penalty income flowing into its coffers. Chase and other banks are preparing a full-court marketing blitz, which is likely to include filling mailboxes with various aggressive and persuasive letters, calling account holders directly, and sending a steady stream of e-mail to urge consumers to keep their overdraft service turned on.

Starting this summer, banks must get consumers to agree, or “opt in,” to a service covering purchases on a debit card when there is not enough money in their account. The Federal Reserve has ordered the same restriction for banks that want to let people withdraw more than their balance at an automated teller machine. Many banks now automatically provide such coverage for fees of up to $35 or more.

So many people now dip their balance below zero that banks generated an estimated $20 billion from overdraft fees on debit purchases and A.T.M. transactions in 2009, according to Michael Moebs, an economist who advises banks and credit unions. All of this revenue is potentially at risk, since these are the two areas that the new Federal Reserve regulations cover. (Banks generate an extra $12 billion by covering checks and recurring bills; under the new rules, they can still cover those and charge fees without customers’ consent.)

Over the last decade, these fees have become an increasingly important source of income for banks as consumers have turned to debit cards to pay for a wide variety of their purchases, whether monthly bills or a pack of gum. (Many banks also offer less controversial overdraft programs in which consumers sign up to cover shortfalls in their checking account by pulling money out of a savings account or a credit card.)

The persuasion campaigns, which are just getting under way, come at a precarious time for many banks and credit unions as they scramble to find new revenue streams amid an economic downturn and new laws and regulations that threaten profitability. For instance, new credit card laws that went into effect Monday limit banks’ ability to raise interest rates on existing balances.

Given the billions at stake, consultants are urging banks and credit unions to hire them to help. “Your fee income will take a substantial ‘hit’ if you don’t start getting consumers to ‘opt-in’ for POS/ATM overdrafts NOW!” Mike Sobba, president of Strunk & Associates, a financial institution advisory service, warned banks in a pitch on the company’s Web site.
Some are even lobbying banks to focus their pitch on the minority of customers who are responsible for the vast majority of overdraft fees. According to a Federal Deposit Insurance Corporation (http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_deposit_insurance_corp/index.html?inline=nyt-org) study in 2008, 93 percent of overdraft fees come from the 14 percent of people who exceed their balances five times or more in a year.

“Doesn’t it make sense to try and protect this revenue stream and encourage these customers to opt-in?” said Eric Wittekiend, strategic adviser at Raddon Financial Group, in a report (http://theraddonreport.com/?p=2414) aimed at banks and credit unions. “Right now I’m favoring an aggressive opt-in strategy to protect as much revenue as possible,” he said.

Another consultancy, Pinnacle Financial Strategies, advises an “Opt-in Total Solution” program for banks and credit unions trying to stem losses in overdraft fees. Pinnacle’s briefing paper urges an “account holder identification process” to zero in on consumers who pay such charges repeatedly and persuade them to keep the status quo.

The banks’ marketing campaigns range from subtle to alarming. In recent weeks, Chase has tested several direct-mail pitches to see whether an assertive or alluring tone will drive people into a branch to sign up for overdraft coverage. “Watch your mailbox so you can say ‘Yes’ to continue Chase debit card overdraft coverage,” read one note, a toned-down version of an alternate letter warning consumers that their debit card might not cover unexpected emergencies, like a highway tow.

A spokesman for Chase said: “We have begun to reach out to customers and are encouraging them to sit down with a branch banker to make sure they understand overdraft services, which can be confusing. We want them to make an informed decision.”

( how about reach up and pull your heads out of your asses simplify? The bankers and their lawyers know well, intend that the complexities will steal money from people. )

When consumers get to the bank, another pitch awaits. Mark Sorenson went into a Dallas branch of Bank of America (http://topics.nytimes.com/top/news/business/companies/bank_of_america_corporation/index.html?inline=nyt-org) to turn off the overdraft function on his debit card recently and got a distressing response.

Beware, his banker cautioned. If Mr. Sorenson used the card to buy gas, the station might place a hold on his account and he might not be able to fill up at all, even if he had enough money in the bank to cover a full tank.

“My impression was that it was something he’d been briefed on,” said Mr. Sorenson, an architect who said he had tired of paying multiple fees when the bank automatically covered shortfalls on his debit card. “He was trying it out on me.”
A Bank of America spokeswoman said that its efforts, including giving consumers a document called “Opting Out of Overdraft Coverage,” were not meant to encourage customers to remain in overdraft services but to make sure they understood the complexity of the issue.

Rebecca Borné, policy counsel for the Center for Responsible Lending, said banks still had “tremendous incentive to get as many consumers to opt in as possible.” That is because new Federal Reserve regulations taking effect this summer would still allow banks to charge high fees for overdraft, with no limit on the number of times they impose the penalty.

Twinned with the blitz is a lobbying campaign in Washington by community banks and credit unions against several Congressional measures that would impose tough limits on overdrafts. They argue that their overdraft fees tend to be less than the large banks, and that overdraft provides a valuable service to customers, helping them overcome short-term money woes and saving them from the embarrassment of having a card rejected.

Several members of Congress have proposed legislation that would allow banks to charge just one overdraft fee a month, and six a year, and prohibit the reordering of transactions from largest to smallest to maximize fees. But while Democratic leaders insist overdraft legislation remains a priority, the bills have languished as lobbyists have pushed for delay and Congress focused on other financial issues.

“The ultimate strategy was not delay for delay’s sake,” said Steve Verdier, director of congressional affairs at the Independent Community Bankers Association. “The strategy was to ask Congress for enough time to explain the complexity.” :lol

Amid a growing public outcry over these fees, several large banks announced changes to their overdraft policies last year. Bank of America said it would not charge a fee when customers exceeded their balance by $10 or less per day and would limit overdraft fees to four per day. At the end of March, Chase is eliminating overdrafts for customers whose accounts are overdrawn by $5 or less and has already limited overdrafts to three per day.

But even with those changes, customers could still incur more than $100 in fees a day if they opt to take overdraft coverage.

At least one credit union is using the new Fed rules to try to differentiate itself from its competitors. On its Web site, the UW Credit Union in Madison, Wis., says, “While we expect some financial institutions may aggressively market the idea of a consumer ‘opt in’ within the boundaries of this regulation, we have no such plans.”