Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, December 14, 1993 TAG: 9312140029
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
SOURCE: By Mag Poff staff writer
DATELINE: LENGTH: Medium
"The results of our analysis confirm outright price gouging of consumers by the banking industry," said Chris Lewis, the group's director of banking and housing policy.
"Bounced-check fees are a raw grab for profits - picking the pockets of millions of unsuspecting small depositors who overdraw their accounts, often as a result of traps set by banks themselves."
The report, released Thursday, alleges that the commercial banking industry collected $4.35 billion in bounced check fees in 1992, but costs were only $685 million, resulting in a profit of $3.67 billion.
A spokesman for the American Bankers Association, Ed Alwood, responded, "The fees are completely avoidable. It's very simple. You don't write checks for more money than you have in the bank."
Moreover, 68 percent of banks offer overdraft protection lines of credit, he said.
Alwood said fees are set to capture customers' attention and provide an incentive for avoiding overdrafts, not to pile up profits. He cited the congressional check kiting scandal as an example of what can happen in the absence of penalties.
The federation said banks process a customer's largest check first on any given day, so an account is depleted quickly. That permits a bank to charge fees for all other checks processed that day.
It also said banks charge higher fees on no-frills checking accounts even though processing costs are no higher.
The organization warned consumers to be wary of bounced checks during the holiday shopping season, when they are most likely to overdraw their accounts.
The federation advised consumers to avoid writing checks before a bank has credited a deposit, to seek a waiver of fees and to obtain overdraft protection.
It warned consumers to look at their bank statements for possible year-end increases in fees for various services.
by CNB