It should come as no surprise to anyone that banks are increasing their fees for various account services at a faster clip than in the recent past. These fee increases in turn have attracted attention, and led to calls for the Federal Reserve to involve itself in curbing excesses. Meanwhile, concerned that many people were taken advantage of by lender practices in the home loan industry, the Obama administration now proposes to create a Consumer Financial Protection Agency with broad powers to prevent abuse. Clearly, and predictably after years of laissez-faire, regulation is fashionable again.
The financial services industry is vigorously opposing the CFPA. Any sector of business can generally be expected to protest anything that may impose change or restriction, but I wonder why they bother. As I said in my previous post, neither regulation nor deregulation has worked effectively to protect consumers over the long haul.
The relatively toothless legislation recently passed by Congress on credit card fees and practices is indicative of the problem. While making some new requirements regarding notification and other administrative procedures, it sets no effective limits on fees or interest rates (only on how rapidly they may be increased). Nor should it - broadly, most Americans accept that controls on prices, interest rates, and the like only interfere with, and may badly skew, the action of free markets. Congress isn't prepared to get that tough; but absent such limits, the protective effects of legislation will be temporary at best. Already of course, banks are using the changes effected by the credit-card reforms to justify their increases in fees for other banking services. Where there's a will, there's a way; the sky is the limit where new and/or higher fees on checking accounts are concerned.
Of course banks, like any other profit-making business, have to come up with a revenue stream that covers their expenses and leaves them a profit. No one should object to that. But the question is, at what point does profit-making turn into gouging?
Is a monthly fee just for having an account reasonable? My current bank wants $36 for a stop-payment on a check; that seems excessive given the action can be accomplished by a simple mouse-click. An overdraft is the same price seems more reasonable for an overdraft IF it's the customer's fault; but it should be grounds for mayhem when it's the bank's fault (e.g., they credit your deposit to the wrong account) but they still try to charge you for it. Electronic check-clearing was passed to make life easier for banks but once again, if the bank's data processors accidentally key in your mortgage payment as 14,000 rather than 1,400, you'll be in for a big surprise and your bank will try very hard to make you pay for being overdrawn. These are areas (of procedure, not specific fees) where Congressional action may have some result.
For the consumer, though, the real key to protection is vigilance and information. The banking sector is still competitive enough that there are always banks willing to make a better deal for your money. Some megabanks, through amalgamation and acquisition, are working to change that but for now, it's the best protection available.
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