This is the second part of a 3-part article on secrets banks don’t want you to know.
Part 1, began discussing bank fees as good for the financiers and bad for the consumers. Continuing…
- Beware the bank fees.
Overdraft fees are another killer expense for the customer that adds up to big profits for banks. If you withdraw money from your bank account without sufficient funds to cover the amount, your bank will punish your poverty by charging you a significant fee, typically $35. That ain’t chump change.
Sarah Titus recalled a customer of U.S. Bank (“the WORST bank in the world”) who had made a withdrawal at the ATM outside the lobby. He entered the teller area “so distraught” because “he just pulled out $20 from the ATM and it didn’t say his balance until AFTER it gave him the cash.”
U.S. Bank’s policy indicates they are happy to set their customers up for a pricey overdraft fee by failing to notify them of their account balance until after an automatic withdrawal, even if that action triggers a negative account balance – and subsequent overdraft fee.
That unfortunate man had to pay a $40 U.S. Bank overdraft fee each day until he brought the balance back up over $0. In that case, payday was three days later, and Titus confirmed, after checking the customer’s record, that he had racked up $120 (3 days X $40/day) of punitive overdraft fees.
Overdraft protection service is on an opt-in basis – the customer has to agree to allow the bank to cover a balance shortfall and pay for part or all of the withdrawal. But a 2014 report from the PEW Charitable Trusts indicated that “more than half of those who incurred a debit card overdraft penalty fee does not believe that they opted into overdraft coverage.”
Consider these facts from PEW:
- Ten percent of Americans paid at least one overdraft penalty fee in 2013, and another 5 percent paid an overdraft transfer fee.
- On average, people who paid an overdraft penalty also incurred additional fees, for a total of $69 the last time their account was overdrawn.
- Thirteen percent of people who paid an overdraft penalty say they no longer have a checking account; 19 percent report responding to overdraft fees by discontinuing overdraft coverage; 28 percent report closing a checking account in response to overdraft fees.
There are typically three options available for someone who doesn’t have enough funds to cover a withdrawal transaction:
- Incur an overdraft penalty fee. The bank makes a short-term advance to cover the transaction and charges a fee for the service (median fee: $35).
- Incur an overdraft transfer fee. The bank transfers funds from a linked source, such as a savings account, line of credit, or credit card, and charges a fee for the service (median fee: $10).
- Have the transaction declined.
PEW revealed that “Large majorities of those who paid an overdraft penalty prefer that a transaction is declined rather than overdraw an account, and they support greater regulation of overdraft products.”
- Banks lie about their loan rates.
The legal term for a lie (falsehood) is “misrepresentation.” All three words mean the same thing: the absence of truth.
Banks misrepresent the interests rates they charge customers for taking out a home mortgage, car loan, or education loan. Although a low rate is advertised, the lendee (the person getting the loan) has to meet certain qualifications – or pay a higher rate. This can amount to large dollar amounts over the life of a long-term loan.
Mortgages, in particular, are fraught with fraud on both sides of the banker’s desk. Lenders lie about low-interest rates which are reserved only for qualifying customers. Both banks and property owners lie about the collateral value of the real estate underlying the loan.
Consequently, lenders loan amounts larger than the value of the underlying property collateral. This means that if the real estate goes into foreclosure after the lendee fails to make on-time mortgage payments, the bank must operate as a real estate agent and sell properties for pennies on the dollar.
When a company loses money in one department (such as mortgages), it will try to make up the loss elsewhere in the organization (by lowering interest rates paid and increasing fees, for example).
The conclusion reached by a 2014 report, revised in 2016, that was issued by the Research Division of the Federal Reserve Bank of St. Louis was sobering:
“We have built a model where there are incentive problems in the mortgage market – banks can fake the quality of mortgage debt, and consumers can fake the quality of housing posted as collateral.”
Regarding automobile loans, the statistics are staggering. Finder.com revealed:
“In 2016, Americans applied for and racked up $564.6 billion in auto loans. By the end of 2017, that number had jumped to $568.6 billion.”
Banks are earning enormous profits from car loans, whether the loan originates at the bank or on the car lot.
“The national average for U.S. auto loan interest rates is 4.21% on 60-month loans,” reported ValuePenguin. The typical annual percentage rate (APR) for car loans falls between 3-10 percent.
To be continued in Part 3 – right here at TheDailyConspiracy.com!