Aug 10, 2009 8:02 pm US/Eastern
Frank Says Bank Fees Have Gone Too Far
BOSTON (WBZ) ―
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The Financial Times quotes research from Moebs Services, which says U.S. banks are poised to make $38 billion in overdraft fees this year.
WBZ
Some of the nation's biggest banks that received millions in stimulus funds are still hiking fees.
And making money from it.
The Financial Times quotes research from Moebs Services, which says U.S. banks are poised to make $38 billion in overdraft fees this year.
The Consumer Federation of America surveyed overdraft fees at the nation's 16-highest banks and found fees have gone up at half of them, with the median overdraft fee at $35.
Assistant Professor of Finance Kristina Minnick of Bentley University says banks are using fees to make up for losses in other areas, such as lending.
"It's business 101," said Minnick. "Banks have sustained losses in other areas and to recuperate, they've instituted fees in areas where they can, for instance overdraft protection fees."
But Congressman Barney Frank, who chairs the House Financial Services Committee, says the fees have gone too far.
"Overdraft fees used to be used as a way for banks to make up costs and to discourage over drafts, which is reasonable. They've now become a profit center for banks," said Frank.
Frank is pushing for the creation of a Financial Consumer Protection Agency. It would protect consumers from unsafe financial products in the way the FDA protects consumers from bad food and dangerous drugs.
Said Frank, "It will be able to say to banks, you can have a fee that's going to stop people from overdrafting, but you can't encourage them to overdraft."
Frank said this will be a major congressional battle in the fall. Many in the banking industry oppose creating that agency. A spokesman for the Massachusetts Bankers Association points out the industry is already highly regulated, adding the costs of such an agency could unfairly punish community banks, which were not to blame for the nation's financial crisis.
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