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Overdraft Loan Survey Finds Problems For ConsumersConsumers Pay $10 Billion in Overdraft Fees Yearly |
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April 24, 2006
A telephone survey of 3,310 households done for the Center for Responsible Lending shows that a mere 16 percent of bank customers account for nearly three-quarters of all overdraft loans. "A service created as a favor for customers has morphed into a harmful practice that traps vulnerable customers in debt," said Eric Halperin, a senior policy counsel at the Center. "Some banks now realize that trapping borrowers and charging them a $25 fee for a $20 overdraft loan is a pretty good scam." Financial institutions are increasingly turning to fees to increase their income. Of the estimated $10.3 billion in overdraft fees Americans pay each year, the survey indicates that $7.3 billion comes from repeat borrowers. The Center for Responsible Lending calls on the Federal Reserve and other regulators to:
It's PredatoryOverdraft fees aren't generally included in discussions of predatory lending, which drains more than $25 billion from low-wealth families in the U.S. each year, but the CRL says they should be. "Though predatory mortgage loans and payday loans receive the lion’s share of attention as predatory practices, overdraft loan fees comprise about a third of that $25 billion," the organization said. Earlier CRL research estimates that checking account customers pay more than $10.3 billion in overdraft loan fees every year. Approximately, three quarters of that, $7.3 billion, is collected from repeat borrowers, rather than one-time users. Report Your Experience
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