Banks are the new Tobacco Industry

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by David Safier
Capitalism isn't immoral. Neither are sharks, alligators and other carnivores. Left to their own devices, capitalists and carnivores devour living things without concern for the consequences to others. That's amoral, not immoral, since it's in their natures.

Of course, we do our best to protect ourselves from sharks and alligators at the same time we recognize them as important parts of their ecosystems. For all the fact that I believe capitalism is probably the best, or least bad, economic system, we need to protect ourselves from its excesses as well.

What got me on this little philosophical/economic tirade is an article in this morning's NY Times about charges for overspending with debit cards, which, along with overdraft fees for checks, bring in $27 billion a year, more than banks make on penalty fees from credit cards.

A $3 debit card latte can cost you $34 if you don't have enough money in your checking account. Follow that with a few items at the market and the hardware store, and a normal day can turn into a very expensive headache.

Who are the most liable to overdraw their checking accounts? People without much money in the first place, of course.

Banks love the system. As a matter of fact, they warn that they could go broke without the fees. The  industry that brought the economy to its knees is begging government not to take away one of its cash cows.

If the fees were considered interest, here's how much they would amount to:

According to the F.D.I.C. study, a $27 overdraft fee that a customer repays in two weeks on a $20 debit purchase would incur an annual percentage rate of 3,520 percent. By contrast, penalty interest rates on credit cards generally run about 30 percent.

But really, they're doing it for our sakes.

Bankers say they are merely charging a fee for a convenience that protects consumers from embarrassment, like having a debit card rejected on a dinner date.

How thoughtful of them! And if they made the overcharges more reasonable, or warned people when they were out of money in their checking accounts, they'd have to make it up with other fees, and we wouldn't like that, now would we?

Oh, and they often shuffle the chronological order of debit charges, putting the big ones first to get you over the limit, then charging for each subsequent little transaction. But that's for your sake as well.

Mr. Talbott, of the Financial Services Roundtable, said some banks reordered purchases based on surveys showing that consumers want their most vital bills, like rent and car payments, which tend to be for larger amounts, paid before items like a $3 coffee.

These people are amoral loan sharks, preying on people, often with little money, who don't keep careful track of their checking account balances, a problem made worse because swiping a debit card is so much easier than writing a check. That's one of the reasons we have regulations, to protect us from capitalism's amoral nature. Making a buck is in the business DNA. Protecting ourselves from the rapacious appetites and destructive tendencies of amoral business people is in our best interests.

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