Banks Told To Target Financially Unsavvy For Overdraft Reup

Consulting firms are telling banks to hone in on the financially precarious to sign back up for costly overdraft protection that will only further erode their bank account. Here are some quotes from their strategies:

“…20 to 29% of your members give you 90% of your NSF income. Target those top 29% and get them to opt in …”
“If they are in the top 29% of abusers, call them.”

“Target [so-called] “frequent fliers”…focus attention on these customers first.”

(The firm termed “frequent fliers” as those who don’t pay attention to account balances, live paycheck to paycheck, or intentionally overdraw their accounts.)

“Regulation E offers aggressive bank marketers opportunities to maintain or even increase revenues from their overdraft programs.”

“[a]fter all, this is your most profitable fee group.”

Studies have shown (PDF) that those who frequently overdraft are most likely to be lower-income, single, non-white renters.

Banks Target, Mislead Consumers As Overdraft Deadline Nears [Center For Responsible Lending]

Comments

Edit Your Comment

  1. kataisa says:

    “Studies have shown that those who frequently overdraft are most likely to be lower-income, single, non-white renters.”

    Link?

  2. smo0 says:

    I’m a single, white renter… and I used to Overdraft a lot… mostly because my card wasn’t declined if I went for coffee or forgot about an epayment I made…. then I’d get hit with the fee – worst off, they usually start a “snowball” effect of fees which drive you further and furth in debt…..
    I don’t do it anymore and I’ve made sure that “convenience” was removed from my account – I haven’t been declined, I’ve managed my money better – and I haven’t seen a fee in a year at least….
    But now they are trying ever-so-hard to get me to opt back in.

  3. smo0 says:

    I’m a single, white renter… and I used to Overdraft a lot… mostly because my card wasn’t declined if I went for coffee or forgot about an epayment I made…. then I’d get hit with the fee – worst off, they usually start a “snowball” effect of fees which drive you further and furth in debt…..
    I don’t do it anymore and I’ve made sure that “convenience” was removed from my account – I haven’t been declined, I’ve managed my money better – and I haven’t seen a fee in a year at least….
    But now they are trying ever-so-hard to get me to opt back in.

  4. dragonfire81 says:

    If we completely ELIMINATED overdraft protection would everything suddenly go up in flames??
    I seem to remember a time when it didn’t exist and I don’t recall it being a huge problem for consumers.

    • smo0 says:

      I often wonder about this… they said the banks made something like 27 bil over the last year they were all using these “protections.”

      This didn’t exist before… so question – if they HADN’T had this… what would it have really looked like in 2008 when the bottom fell out…..

      It’s like a privatized bailout from the consumer…

    • kataisa says:

      Overdraft protection is pure profit for the banks, to the tune of about $500 million dollars worth. The rules do nothing to protect the hapless consumers seduced into opting-in from repeated overdraft charges.

      • jurupa says:

        Its not purely profit for the banks actually. As banks loose money when someone overdrafts on their account drawing money on the bank instead on their account. The reason banks make so much on it is because so many people overdraft on their account. People today are a lot less finically knowledgeable than they where back then.

        • c!tizen says:

          Is it just me or does “Overdraft Protection” sound like it should protect you from overdrafting? This makes me wonder what my bank considers “Fraud Protection”.

      • jeepguy57 says:

        “The rules” shouldn’t have to do anything. They shouldn’t even be needed. People need to be responsible with their own money. Its what got this country into the recession. No personal or financial responsibility. At all.

        • quijote says:

          Avoiding overdraft fees is not always as simple as having “financial responsibility.” First of all, having a checking account is pretty much a necessity today. But for the people who are living paycheck to paycheck, and whose balances drop below $10, it can be dangerous, even when you’re paying careful attention. When you’re poor, every dime counts, and when you need those last few dollars in your account for food, and you go over by fifty cents, you can face hundreds of dollars in overdraft fees (because the next day, larger withdrawals are processed first). It happened to me.

    • evnmorlo says:

      Back in those days banks would charge you a monthly fee and a fee for each check you wrote.

    • Nigerian prince looking for business partner says:

      “I seem to remember a time when it didn’t exist and I don’t recall it being a huge problem for consumers.”

      I also remember this time before debit cards. You either used cash or checks for absolutely everything. Bouncing a check had legal and financial consequences, as well as a social stigma attached to them; as such, most people were pretty anal regarding keeping registries. Since a check could theoretically be withdrawn from your account at any time, you also had to be very conservative with finances.

      • Conformist138 says:

        Convenience, it turns out, is terribly inconvenient. The more convenient money is, the worse we are managing it. The more convenient food is, the more junk we willingly shovel into our mouths. The moment something gets easy, we manage to abuse it to death. This is why we can’t have nice things.

    • ShruggingGalt says:

      Consumers got really upset at the banks before OD protection existed.

      Back then, banks processed smaller items first.

      And consumers demanded that they pay the LARGE items first. (to avoid foreclosure, car repossession, evictions, having to pay with money orders or certified checks all the time…..) Which led to the banks starting to think about the risk of OD a $25 check when they had $20 in the account. So they started allowing it…for a fee.

      And now we’re back to square one.

  5. Fuzzy_duffel_bag says:

    Sovereign called me twice (well, talked to me twice, they called a bunch but I ignored them) and even after telling both reps I didn’t want their “protection” I get the written confirmation that I am covered!

    Thanks guys.

    • craptastico says:

      i just got that from sovereign as well. first i received a letter saying i’d have to opt in or “miss out on account protection”. then after not opting in i got a letter confirming that i had it anyway. clearly this is shenanigans

  6. Bob Lu says:

    Sell the service to those who used to use the service a lot. What’s wrong with it?

    It is funny that a bank needs a “consulting form” to tell them such obvious thing, tho.

    BTW is the consumerist’s comment system not feeling well today?

  7. Kingeryck says:

    nononononono “Overdraft protection” is what PROTECTS you from OVERDRAFTS. ie. savings transfers or lines of credit. I work at a bank and have to tell people that all day! It drives me nuts. Overdraft protection is not when your things are paid and you are charged a fee.. that is simply an OVERDRAFT. If a transfer is made to keep you from paying fees.. you are PROTECTED.

    • aaron8301 says:

      But those transfers always come with a fee, just usually a smaller one.

    • peebozi says:

      Oh, so this is why they’re targeting those who live paycheck to paycheck (but have a savings account)!!!

      thanks for the clarification! also, why would the banks, whose only responsibility is to increase profits, want to offer their “best customers” this service?

  8. Doubts42 says:

    “(The firm termed “frequent fliers” as those who don’t pay attention to account balances, live paycheck to paycheck, or intentionally overdraw their accounts.)”

    So basically those that screwed themselves?

    If you are not paying attention to your own checking account, or are intentionally overdrawing, then screw you, you asked for this to happen to you.

    • Thorzdad says:

      That’s some pretty good spin they put on that. People who live paycheck-to-paycheck aren’t ignoring their balances or intentionally overdrafting. They’re perfectly aware how low their balances are. But, they still have to pay their rent, pay the light bill, etc.

      As for intentionally overdrafting…I have to wonder how many of those overdrafts are the result of the banks running the debits against your account first and then run any deposits (instead of running debits/deposits as they’re written) People who live paycheck-to-paycheck quite often have to juggle debits and deposits.

  9. Beeker26 says:

    I was thinking this exact same thing the other day while reading about Chase’s high-pressure tactics on some of their customers.

    I *never* bounce check or overdraft, so I guess there is little for them to gain by pushing me into opting-in. But if you’ve got someone whose history shows that they frequently overdraft in this manner, yeah, you better believe they are going to target these people HARD so as not to lose that revenue stream.

  10. Dallas_shopper says:

    Repugnant.

  11. Jimmy37 says:

    Yeah, banks count on these stupid people who refuse to the white thing and get educated. These are the kind of people that see signs like “1 for $6, 3 for $20″ and buy 3. These are the same people who would bounce checks because addition and subtraction were too advanced for them.

    • omg says:

      “Yeah, banks count on these stupid people who refuse to the white thing and get educated.”

      OMG, what’s the white thing?

  12. C. Ogle says:

    I can still taste the $3 cheeseburger from Jack in the Box that cost me $165 in cascading overdraft fees a couple of years ago. It wasn’t nearly as delicious as I wanted it to be.

  13. brinks says:

    I remember being a college kid and having no idea that I had overdraft protection on my account. I figured if I used my debit card and I didn’t have enough money in my account, my card would be declined. Hahahahaha. The stupidity of youth. I made my bank so much money in fees because I didn’t pay enough attention.

    Many years later, I decided to opt in when it became an option. I’m unemployed right now and I fear emergencies. However, once my income is stable again, I’m opting back out.

  14. Corinthos says:

    One thing I hate about joint accounts. My wife is gullible and I can see her agreeing to it even though I’ve warned her of this.

  15. XTREME TOW says:

    USBank’s checking account brochure at table with credit card applications and other services says they charge $13/transaction for non-suficient funds,
    Teller gives hard sell for “Overdraft Protection for only $15 a month!” hands me a brochure for this sevice. That brochure says “$15/mo + 1.5% of average monthly balance.”
    I say to teller “You mean since I never overdraft, I am SAVING FIFTEEN DOLLARS A MONTH!? WOW! Thanks for pointing that out to me! Now would you mind cashing this check, please?””

    If I ever decide to overdraft, I might sign up.

  16. Coelacanth says:

    I wish Chase would just give up sending notices about Overdraft “Protection” changing on August 15th, as if the world’s going to come to an end. The barrage of banner ads, notices on the ATMs, and most wasteful of all – sending an endless stream of flyers in the mail.

    No, I don’t want their stupid “overdraft protection.” I’m quite happy with the opt-in policy, thank you.

  17. Dutchess says:

    What’s wrong with targeting the people that generate the most fees.

  18. Dallas_shopper says:

    Astonishingly I have not heard one peep from my bank (Bank of America) about overdraft protection, which I opted out of when I set up the account. I’ve never overdrafted the account; maybe that’s why?

    In any case I’m relieved they have not pestered me.

  19. Destron says:

    You know, only two times in my life have I ever over drafted. Not one of those two times was in the last 10 years, and NEVER with Chase. But I swear to god they have killed a whole fucking forest with the amount of letters they have sent me ALONE. And the damn things are on 65% recycled paper! I want to go in to my local branch and tell someone where to shove their “protection”.

  20. peebozi says:

    This is, essentially, a legal right for the bright and educated to fleece the less bright and uneducated.

    1,000,000′s of liar, er lawyer, hours have been spent to fleece the low and middle class. Of course, the low and middle class are attempting to deal with a person(hood) who has 100′s of liars, er sorry lawyers, on their payrolls.

  21. stlbud says:

    There’s a special place in Hell for bankers.

  22. peebozi says:

    I wish the banks would listen to me when I tell them to jump off a bridge because there’s a shiny nickel at the bottom. None have jumped, but they’ve all walked down to the bank to find the nickel.