business news in context, analysis with attitude

Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire.

• Sen. Cory Booker (D-New Jersey) has introduced legislation that would stop financial institutions from “from charging overdraft fees on debit card transactions and ATM withdrawals. The bill would also restrict the frequency of such charges on payments made by check,” Vix reports. These fees, the story notes, “have become a crucial source of revenue for financial institutions and have long targeted low-income customers who struggle the most to stay out of debt …In 2016, US customers paid roughly $15 billion in overdraft and bounced check fees. That’s the equivalent of nearly 10 percent of the net income that banks raked in that year.”

The legislative proposal, Vox reports, was “informed by a survey of several large banks that his office conducted last year.”

Lauren Saunders, with the National Consumer Law Center, tells Vox that “it’s been well-documented for many years that banks have used a variety of methods to push people into incurring overdraft fees to boost their income. They do a lot to push huge costs on the people least able to bear them.”

And Rebecca Borne, of the Center for Responsible Lending, says that it used to be that “as debit cards gained popularity, banks initially rejected transactions if users didn’t have enough money in their accounts … Institutions quickly discovered, however, that enabling such transactions to go through and charging the customer a subsequent overdraft fee could be a handy source of income.”
KC's View:
I checked in with Jennifer Hatcher, senior vice president of Government and Public Affairs at the Food Marketing Institute (FMI), to see what the trade association’s position might be on this legislation. She responded:

Senator Booker recently introduced legislation that attempts to tackle the problem of predatory overdraft fees. His legislation includes a number of different strategies to combat the problem, but a card with a PIN or another secure authentication cannot overdraft, is faster, allows for cash back and is less expensive to customers and grocers. This is something FMI, too, has long advocated and our members have recommended to customers.

“Predatory” seems to be a word that is - and should be - attached to most financial institutions. While I think that it is all well and good to simply encourage customers to make their transactions in certain ways, I’m not sure that this is enough. At a time when Kroger has thrown down the gantlet - it no longer takes Visa cards at the 21 stores and five gas stations that are part of its Foods Co chain, and has threatened a broader band if some sort of accommodation on interchange fees cannot be reached - it seems to me that it is time to play hardball on every front, with consumer interest always front and center.