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Friday, January 24, 2003
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In Heather MacDonald's book The Burden of Bad Ideas, she details the shift in focus of the New York Times' Neediest Cases charity campaign over the decades. When it began, it targeted those who had problems not of their own making -- orphans, those who were ill, etc. More recently, the Times began to focus on people whose need arose from their own misconduct -- drug abuse, children they couldn't afford, etc. She used this relatively minor issue to highlight one of the problems with modern liberalism: the refusal of liberals to force anybody to ever take responsibility for their own lives, to treat everyone as a victim, either of circumstances or of malevolent forces.

I thought of this when reading the latest silliness from the New York Times the other day, complaining -- in the news section -- that banks make money by offering services to their clients. What service? Believe it or not, overdraft protection. Yes, banks are evil because, when their customers write bad checks, the banks cover the checks instead of bouncing them. And then they have the nerve to charge fees to the customers. (The article implicitly accuses the banks of charging too much, but apparently the Times doesn't realize that allowing the checks to bounce would cost the customers double fees: the bank fee plus the fee charged by the company to whom the check is written.)

But here's the best part:
Typically a bank's best customers, about 10 percent, are offered traditional overdraft lines of credit, and they are not enrolled unless they explicitly agree. In contrast, the new programs automatically enroll almost every checking-account customer who does not have a traditional overdraft line. When they use debit or automated teller machine cards, customers often do not realize they have overdrawn their accounts until they receive a letter from the bank disclosing the fee.
Unless, you know, the customers figure out how much they have in their accounts before they overdraft. You know, like by balancing their checkbooks? Or by selecting "Balance Inquiry" at the ATM?

And what consumer advocacy story would be complete without a sob story, including a life threatening illness?
While banks generally make the programs available to all customers, statistics from industry consultants show a few accounts generate most of the fees. In many cases, those customers are financially unsophisticated and are unaware until later how much they are being charged, consumer advocates say.

Mark Gregg, an Ohio man who received a liver transplant in November 2001, estimated that he paid more than $1,000 in overdraft fees to FirstMerit Bank of Akron, Ohio, last year. Account statements provided by Mr. Gregg supported that estimate.

"I was really sick, so there were things going on that I wasn't really diligent about," said Mr. Gregg, who was unable to work after the transplant and whose sole income is a $974 monthly Social Security disability check.
Oh. Well if you weren't diligent, I definitely blame the bank. After all, if there is one thing you shouldn't worry about being diligent about, it's your finances.
In October, FirstMerit closed Mr. Gregg's account, claiming he owed more than $400 in fees. A few days later, it took those fees out of an account belonging to his parents. Mr. Gregg's mother, Barbara, had co-signed his account when he opened it.

"I was storming mad," Ms. Gregg said. "They went into my account; they did not get my permission. I think that should be illegal." Ms. Gregg said she and her husband had been FirstMerit customers for 47 years.
Well, you know, they kind of actually did get your permission, lady. What do you think you were doing when you co-signed?

Finally, if the anecdote failed to arouse your sympathy, the Times includes the "big picture" that it's so fond of:
Mr. Gowdy and other consultants agree that low- and middle-income consumers with low balances are more likely to use overdraft protection than wealthier people.


But overdraft fees are not paid equally by all customers.

In an article on bankstocks.com, an industry Web site, Ralph Haberfeld, a bank consultant, estimated that 4 percent of customers pay half the fees. That estimate would imply that a small group of people, like Mr. Gregg, the transplant patient and FirstMerit customer, pay as much as $2,000 annually in overdraft fees.

Overdraft protection programs "target people that least can afford it," Mr. Gregg said. Banks that use them "have got you against a wall, and you just throw up your hands."
You know what else is done more by poor people than rich people? Bouncing checks. Perhaps that might be why the poor use overdraft protection more. Perhaps.

So, if you read the article, you're left with the idea that the Times (a) either wants banks to go back to bouncing checks written by the poor -- though it's hard to see how this would benefit the poor, or (b) to offer free overdraft protection to the poor -- though it's hard to see exactly why banks would want to do this. We'll let the Times and "consumer advocates" ponder that one for a while.

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