Predictable consequences of trying to limit bank fees

Congress, in its infinite wisdom (yes, that's sarcasm), decides that banks shouldn't charge for a particular service. In this case, it's a fee on the use of a debit card.

So they pass a law that prohibits banks from charging merchants a percentage on every use. It's part of the Frank-Dodd financial overhaul bill and this particular restriction is the Durbin amendment, courtesy of Sen. Dick Durbin (D-IL).

But it costs money for banks to offer and process debit cards and their transactions - a factor members of Congress fail to understand. So what is a bank to do?

Well, they decide to charge the actual card holder a set monthly fee instead. Unintended consequences, which are entirely predictable, are certainly not part of the regular thinking of your 'average' congressional representative.

The fees range from $3-5 per month - if you're able to still have a debit card at all. Some banks, like JPMorganChase, have just eliminated the debit card completely.

So in their effort to 'help' consumers, Congress has ended up shifting the costs of the debit card service from the merchant to the card holder. Brilliant! What a bargain!

But that's not all. One aspect of the Frank-Dodd bill was limiting what banks could charge for overdraft fees. Now, in this day and age of instant information and various other provisions (like automatic transfers from savings to checking when the checking account gets to a certain level or overdraft protection programs), there really is no excuse for bouncing a check. People should know how much is in their account and whether or not there are funds to cover a check about to be written. When they write that check and it bounces, they should pay a fee to the bank.

It costs the bank money to return the check, notify you and deal with the subsequent actions that result. Why shouldn't they charge you a fee - large enough to make you not want to ever end up bouncing a check again in the future??? But people don't like being accountable - and politicians are too eager to help limit your liability for your own stupid actions.

And what, exactly, is the provider of a service supposed to do when they can no longer charge you their costs for that service, especially when they know they'll still need to provide the service even when they can't charge?

Well, they'll do what anyone else would - they'll charge for other things in order to cover the costs of the one they can't charge for.

So everyone who banks will pay more so that the small number who bounce checks don't have to pay for doing so. Again, brilliant!

Congress has decided it can determine how much a business should charge and how much profit it can make. They believe they know better than you and I the value of a service in the marketplace. But they're not actually limiting the profit, they're just playing around with various fees and imposing restrictions thinking (or, perhaps more accurately, hoping) that the banks will just take the restrictions and live with them.

But companies are in the business to make a profit. They don't exist to provide jobs (that's just a by-product of their effort to make money). They don't exist to do social programs (again, that's a by-product of their desire to have customers who thus help them to make a profit). They exist because they want to make money - for the owners and shareholders/investors - many of whom are the very people who are so adamant about restricting their profits in the first place.

In fact, it makes no sense to me that many unions argue against corporate profits when those very same profits are necessary to provide the jobs and benefits the unions so desire. And, most of the pension plans in America - whether individual IRAs, public pensions or private company pensions - are vested in the stocks of the very companies that are being demonized. Can you say 'stuck on stupid'???

So, when a company gets told by government that it can't make a profit with one item, it will begin charging for one that was previously free or add to the price of existing ones - or both.

This is completely and entirely predictable for anyone who understands anything whatsoever about business.

But Congress is, apparently, clueless and so, thanks to their 'help' for us poor consumers who cannot make good decisions on our own, we're now paying more.

Brilliant!

Stop protecting irresponsible behavior

The Blade opines today that banks who charge you a fee for overdrawing your account are somehow 'discourteous.'

Personally, I fail to understand how a bank is being 'rude' in such circumstances.

Aren't YOU the one being rude for expecting the bank to cover your expenditure even though you have no money in your account?

The bank doesn't have to grant you this convenience - they could just expect you to know how much is in your account and never spend more than that.

Of course, that's expecting some level of personal responsibility from people who are driving, handling bills, raising children and probably voting.

According to the Consumer Federation of America, the typical debit card overdraft made by a customer is $20. But the typical penalty fee charged by big banks is $35, and it goes up exponentially the longer it is not paid.

GOOD!

This certainly seems reasonable to me. The idea of the overdraft charge is not to provide a short-term loan to individuals without the usual agreement between lender and borrower - it's provided as a true 'courtesy' by a supplier of a product to prevent you from facing embarrassment. The fee for the overdraft is to discourage you from overdrawing your account on a regular basis. And having the fee increase the longer it's not paid is just common sense!

Think about it: if you suffered no negative consequences for overdrafts, wouldn't you have more of them?

That's the point!

Your irresponsible behavior in spending more than you have is covered by the bank and they deserve to be compensated for the effort and the costs - and to be compensated in a way that discourages you from continuing to be irresponsible in the future.

I see nothing wrong with this.

But politicians - and the editorial board of The Blade - obviously do. They all must think people are idiots. They think these fees, which they describe as 'astronomical,' inappropriately 'cost you.' The fees do cost you, but they should!

Yet these same do-gooders, out to protect the stupid among us, fail to take into account how much the irresponsible behavior of the overdrawn customers inappropriately costs the banks - or the other depositors who don't overdraw their accounts.

Leftists on editorial boards and politicians in Washington, Columbus and One Government Center need to stop promoting feckless, immature and immoral behavior and stop passing laws designed to make others responsible for your bad decisions.