Sunday, October 7, 2012

Do we need more banking regulation?

So I came across an article on ABC news that comes from the blog talking about how banks were still raking in massive profits using overdraft fees despite the new regulations. The article is calling for increased regulation on banks stating that, "these fees have fallen disproportionately on the people least able to pay them: seniors, the young, minorities, the disabled, and military families". and that "High overdraft fees are pushing millions of Americans out of the banking system entirely and into things like payday loans, which have significantly higher cost and significantly lower protection for consumers".   The articles author continues on saying that "The Fed's 2010 opt-in rule was a good first step. But banks have figured out ways around it to keep their pipeline of easy money flowing, with no regard for how much it hurts consumers --- or which consumers get hurt". The regulation that he would like to see enacted are: a ban on all overdraft fees for debit and ATM transactions, lower fees, overdrafts by paper check cannot be declined, post transactions in the order they are made in, and to treat overdraft fees as short term loans and inform consumers of the APR they are getting.

I can understand the need for the original legislation because we should have the option to choose whether we want overdraft protection. However, although some of the ideas above are not bad, i dont believe that we need additional legislation.

Its time for people to start taking responsibility for their actions and stop looking to blame someone else for their problems!  Every single person that has a checking account at the moment has CHOSEN whether or not they wanted overdraft protection. If you chose overdraft protection and you overdraft then you are being extended the COURTESY by the bank of covering your mistake. It is YOUR responsibility (not the banks) to keep your receipts and to record on a daily basis how much you have spent versus how much you have available in the bank. Every single person needs to be on top of their finances, it should not matter what order purchases post in if you are keeping track of how much you are spending.

If you are over 18 then its time to grow up and act like a responsible adult, handle your bills, handle your business, and handle your responsibilities.  Race, age, disability, etc should not matter. The bottom line is, that if you are capable enough to be legally responsible for your actions then you have no one to blame but yourself if you mismanage your money.

At age 17 I was living on my own and yes I made mistakes and I have paid quite a few overdraft fees in the 13 years since then, but I am not whining about it. I know I messed up.  Heck most of those times (although it was a struggle to pay the fees) I was glad that I had the leeway to make those mistakes.

As for payday loans, I truly doubt that overdraft fees alone are pushing people to obtain payday loans. I do agree that they are a terrible option and that they leave many people struggling to pull out of an ever growing sinkhole of debt. However, these options exist for the people who cannot obtain a traditional loan. Things inevitably come up in life and I am sure that in the moment the fees for the payday loan seem reasonable.  I do think that the interest rates for payday loans  need to be adjusted because 390% is just ridiculous. Then yet again it comes down to being a responsible adult. If you go in and sign for a payday loan you are given the terms and you agree to them. You need to have a grasp of your own finances so that you can figure out how you will repay that loan.

The consumer groups pushing for more legislation should be instead be pushing for education. Teach basic finance starting in middle and high school (more than just one chapter in a text book) or offer free courses at adult education centers on how to handle finances and the dangers of payday loans. Pour all that money and effort that is being spent to push legislation into efforts to truly help those who do not understand how to balance their finances.

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