What to do when bank is being unfair – part II

Posted by: Live Smart   
May 19th,
2009

As mentioned in the previous post, the letter there was being sent to House Financial Services Committee; United States Senate Committee on Banking, Housing and Urban Affairs; Federal Reserve; Senator Nelson; Senator Martinez; Congressman Buchanan and President Obama.

Here is the text of that letter:

Mr. Chairman, Senator, Congressman, President

I am writing to you because in our current economic situation big banks, big auto, and even homeowners are being bailed out by the government. However, the working poor, including our enlisted military men and women, are allowed to be fleeced by the very same big businesses that are being rescued by the taxpayer’s money.

My son has experienced these problems first hand: I have enclosed a letter that I sent to my son’s financial institution, Navy Federal. I hope that their CEO is going to resolve the issues we have with this institution, but I know that many more people in the military are dealing with the same issues. In order to stop the systematic swindling of our brave men and women, I propose that we enact new legislation that aims to keep taxpayer funded banks from creating more suffering for our soldiers.

The following is a list of problems and the legislation that could solve them.

Problem:
· Financial institutions charge exorbitant amounts when checking account holder goes to negative balance while using debit cards as charge cards.
· Currently it is more beneficial for the financial institution to allow many small charges that result negative balance than to monitor accounts and refuse charges that would result in negative balance, because each charge carries a hefty reward for the bank.
· Military credit unions have additional protection against risk of non-payment of those negative balances and additional punitive charges, as they, most of the time, have military payrolls automatically transferred to the accounts. They know the dates that the payrolls are processed and they will take the negative amounts from the payroll before the account holder gets access to the funds.
· Military Credit Unions have an additional benefit in current economical situation, as the military is guaranteed employment, so no worries that someone may loose their job next month and cannot pay their overdraft fees.

Remedy:
· Take away incentives to allow debit card charges that result account balance to go negative.
· The technology exists that would allow the financial institution to keep track of account balances in real time so no negative balances never occur, as evidenced by Walmart Visa for example.
· The fees charged for the negative balance, if they happen, should be in proportion to the negative balance. The John Warner National Defense Authorization Act (Also referred to as the Talent Amendment, Public Law 109-364) allows maximum annual interest rate not to exceed 36% for active military. This is good starting point for calculating the maximum fees.

Problem:
· Many transactions between financial institutions are done as ACH transactions now a days. Customers have no clear understanding what are the responsibilities of either financial institution. This can and has created undo hardship for the end customer, the checking account holder.

Remedy:
· Have clear and equitable rules for ACH transactions, that both banks and credit unions are required to abide by and disclose to their customers.
· There should be maximum number of days that can pass between the transaction initiation date and completion date by the receiving financial institution (the one that pays out the money). Especially for military personnel, who is often on the field and does not have access to monitor what charges have cleared and what not, knowing what is the maximum amount of time that ACH transaction must be completed is mandatory. ACH transactions are done by computers, so there are no reasonable reasons why they should take weeks to reach the credit union.
· If ACH transaction cannot be completed because of insufficient funds, the fees/penalties should be proportional to debit. I consider charging 500% fee cruel and unusual punishment, illegal by our Constitution.
· There should be a law that spells out how many times the same ACH transaction can be re-requested if previous attempts were unsuccessful because of insufficient funds. At least I was told by Navy Federal, that there is no such limit and each request is considered as a separate request and would incur an insufficient funds return fee. So in principle, a financial institution could request the same $ 5.00 amount one hundred times and the account holder would be charged $ 2,500.00 returned check fee by Navy Federal.

People with limited means, busy defending our freedom, should not be cash cows for any financial institution. Today they are. The fees that they are charged should be fair and in proportion to the services provided. I urge you to end this monumental injustice soon.

Thank you very much,

Proud mom of US Marine

This entry was posted on Tuesday, May 19th, 2009 at 5:19 pm and is filed under Money. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

One Response for "What to do when bank is being unfair – part II"

[...] have heard back from Federal Reserve regarding the letter published in “What to do when bank is being unfair – part II”. The encouraging news is that feds are well aware of the problems pointed out in the letter and are [...]