From the Financial Times:

US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers...

I'm sorry. How is that mathematically possible?

There are 300 million Americans, and, the FT reports, 130 million checking accounts. $38 billion divided into 130 checking accounts puts the average yearly overdraft total at $300 dollars, which is the equivalent of 9 overdraft charges from large banks like Bank of America. How many Americans really overdraft 9 distinct times a year? Moebs Services discovers, however, that one bad day for a consumer can mean gangbusters for the banks:

At BofA, a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realise they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350.

Banks are defending themselves by saying that overdraft fees are really no worse than parking ticketsĀ  -- responsibility requires financial incentives, and so on. But practices like BofA make it quite clear that banks aren't merely using overdraft fees to regulate withdrawals. They're also trying quite clearly and cleverly to wring customers dry for billions of dollars. Bank overdraft fees totaled $11 billion in 1992. Now they're nipping at $40 billion.

I'm sympathetic to the argument that banks have to build capital in down times, but by turning overdrafters into ATM machines and then falling back on the "Hey, we're just trying to encourage responsible checking!" excuse, they're only making the government's point that a consumer financial protection bill is necessary to regulate the banks' relationship with its customers.

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