(Stillness in the Storm Editor) When it comes to unfairness, banks take the cake. I think most will agree that there’s seemingly no justifiable reason for overdraft fees. If anything, the bank should just do their job—pay things when money is there but stop payments when it isn’t. In 2017, over $34 billion in overdraft fees were collected. Fees that are literally imposed on someone for running out of money. Considering how banks make most of their money—through lending out your deposits as credit to other people, paying you nothing but a paultry divided—overdraft fees are criminal.
Fractional Reserve lending is the way banking works in the modern world. As a matter of fact, loans are where almost all money comes from today. What does that mean? It means a bank can lend money it doesn’t have, making huge profits off depositors. If a borrower defaults, no worries! the Fed will buy the bogus loan and the bank can continue lending money. This is called warehouse lending through securitization.
Here’s how it works.
Related How Governments Steal Your Money and Conceal It Through Inflation
You deposit $1000 in the bank.
A second person comes in and applies for a $10,000 loan.
The bank is legally allowed to lend out more money than it has in deposits, within some preset ratio, like 10 to 1.
The bank lends $10,000 to the second person, with your $1000 as the “reserve.”
The bank then makes interest on that loan, where you pay back the principal along with at least 80% of that paid as interest. That means, for lending out the $10,000 to the second person, the bank made another $8,000 in interest profit—using your money.
Here’s a video explaining it all again, for you visual learners out there.
Let that sink in for a moment.
What we’re talking about is effectively a risk-free money-making scheme run by the banks. The bank makes a lot of profit, for lending money it doesn’t have. For every deposit you make the bank can make lots of money. What does it give you in return? If you have savings you might make 1% to 3% of your deposit amount as a divided. The $1000 you deposited, makes you a whopping $10 a month, while the bank makes huge profits on interest.
How is this fair?
Ever wonder why bank buildings are some of the biggest? Now you know. They make huge profits because of fractional reserve banking.
Given how much money banks make on your deposits, which again, is essentially risk-free profit, is it fair to charge depositors overdraft fees?
Personally, I think it’s criminal.
– Justin
by Staff Writer, March 29th, 2019
Overdraft fees have reached their highest level since 2009, which was at the end of the Great Recession. Consumers paid $34.3 billion in overdraft fees during 2017 compared to $33.3 billion in 2016, The New York Post reported.
Despite the increase, consumers aren’t, in fact, overdrawing their accounts. Instead, Moebs Services says the uptick was caused by credit unions increasing their overdraft fees. Overall, average overdraft fees at banks have risen from $20 in 2000 to $30 in 2017. Over that same timeframe, the average overdraft fee at credit unions has increased from $15 in 2000 to $29 in 2017.
Even so, consumers must opt in to be able to overdraft. And, since 2010, financial institutions have been mandated to provide consumers with their overdraft policies, along with alternatives to overdrafts and the fees associated with them.
The news comes as overdraft fees presented a cost of $15 billion to U.S. consumers in 2016, according to a report from the Consumer Financial Protection Bureau (CFPB) on the impact of bouncing checks in American finance.
Overdraft fees increased 2.2 percent in 2016 from 2015, with $11.41 billion going to U.S. banks, reported CNN. All told, the CFPB estimates $15 billion was charged by large banks, small banks and credit unions. Only banks with assets that surpass $1 billion have to report the money earned from bounced checks or when there isn’t enough money in an account to cover a payment, noted the report.
“Consumers living on the edge can find themselves racking up numerous overdraft charges,” CFPB director Richard Cordray said during a press call covered by CNN in 2017. “Despite recent regulatory and industry changes, consumers with low account balances and little margin for error continue to pay significant overdraft fees.”
Since 2010, the Federal Reserve has been trying to curb the issue by requiring banks to get customers’ permission to cover a transaction. While that resulted in a reduction of the fees, some of the poorest Americans are still getting hit the most, according to Cordray. U.S. consumers who are hit with the fees pay around $450 each year, the CFPB noted.
Stillness in the Storm Editor: Why did we post this?
Corruption is endemic to our world. Organizations that gain the trust of the people misuse that trust and are rarely brought to justice. The people have a valid right to know of the activities of its public servants so as to dethrone them once malfeasance or wrongdoing has been identified. The preceding article highlights corruption within public service institutions, revealing a breach of trust with respect to their lawful mandate to occupy said office. It is critically important for the evolution of society that individuals become aware of corruption, so as to unite together and declare grievances in an effort to correct the situation. When those grievances aren’t recognized by those in office, the people now have a valid right to remove the lawless individuals in these positions of power so as to restore law and order. All of this can only be possible individuals to gain awareness of the corruption at hand and begin the process of forming actions groups capable of issuing lawful rebukes. If done properly, the forces that oversee the realms of men will rally to support the people.
– Justin
Not sure how to make sense of this? Want to learn how to discern like a pro? Read this essential guide to discernment, analysis of claims, and understanding the truth in a world of deception: 4 Key Steps of Discernment – Advanced Truth-Seeking Tools.
Stillness in the Storm Editor’s note: Did you find a spelling error or grammatical mistake? Send an email to [email protected], with the error and suggested correction, along with the headline and url. Do you think this article needs an update? Or do you just have some feedback? Send us an email at [email protected]. Thank you for reading.
Source:
https://www.pymnts.com/news/banking/2018/banking-overdraft-fees-cfbp-credit-unions/
Leave a Reply