01/20/2011 - Congress outlawed many of the credit card industry’s most abusive practices in 2009. The Federal Deposit Insurance Corporation, which regulates about 4,800 state-chartered banks, recently did the same thing with the debit card industry. The banks, which are predictably crying foul, should not be allowed to evade the rules by switching to a less rigorous federal regulator.
Congress set an excellent model with the credit card law. It required companies to give 45 days’ notice before raising interest rates. Late charges and other penalties must be “reasonable and proportional.”
The Federal Reserve, which oversees all banks, should have taken a similar approach to the huge overdraft penalties that banks can charge on debit cards. They can come to $35 a pop — several times per day — driving customers into debt for incidental purchases as minor as a magazine or a cup of coffee. An analysis issued last year by the Center for Responsible Lending found that it was “common policy among banks” to process the largest transactions first, regardless of when purchases were made, to increase overdrafts.
Read the full article Debit Card Predators on The New York Times Web site.