I'm still kind of mesmerized on this one, it felt like regulatory action almost happened, the most lucrative of the overdraft practices got limited circa 2009/2010, and then banks voluntarily toned it down and the regulators mostly looked the other way on things like reordering?
I moved to One Financial, but I've kept a local credit union account as well. This probably makes no sense, but then again it's ok to feel conservative about banking.
It's worked out for me so far. The local credit union is one block away. I have not used it but there are no fees to just park money in a checking account.
I still don't know what happpens to such retail banking as interest rates go negative.
Who on their right mind would rather me charged $30-40 instead of having your card be declined?
Not me, so I try to turn off any such things when I create a bank account
All of this insane behavior is a big reason why the CFPB was created, and legislation was passed to limit “overdraft protection” auto-opt-in.
https://www.consumerfinance.gov/rules-policy/regulations/100...
1. have $10 in your checking
2. pay $9 for steak
3. fill account with $500
4. buy sausage for $2
bank reorders it as
1. have $10 in your checking
2. pay $9 for steak
3. buy sausage for $2
4. charge overdraft
5. count $500 deposit
Is that what banks would do? I faintly remember that really old accounts I had in Germany had overdraft capability, but for all newer(last decade or so) accounts, I had to explicitly request overdraft. I guess it was inherently more user hostile in the US. Although in German its not because of good service, but rather because banks don't trust the consumer.
Given a balance of $100 and 4 transactions of $20, $20, $20, $90 you can either be charged one, or three overdraft fees depending on the order in which your bank deducts those from your account. Basically, ordering from largest to smallest will cause the most number of overdraft fees.
The benefit of US banking despite lax regulation was that there's a ton of different banks and credit unions to choose from. Some are great and some are shit. Literally hundreds to pick from. Canada there was like 5 big banks, a large credit union, and then depending on your area there was maybe perhaps a small community credit union.
Yet we have quite a lot of banks to pick from - around 60 if you include building societies (more if you include private, niche and specialist banks). We also have a fair few new and digital challenger banks like Monzo, Starling, Atom, Revolut and arguably Metro Bank. If anything our banking system seems far more innovative than the US system.
I don't know about Canada, but clearly regulations don't mean that you can't have competition and innovation.
See also regulation about what the incumbent last-mile network provider (Openreach) can charge ISP's to provide services on their lines which has led to a larger number of ISP's available in any one place (unless you're in Hull, because of historical reasons).
as for ISPs, it's hard to do worse than comcast, but at least they don't block a wide range of content by default.
https://en.wikipedia.org/wiki/Web_blocking_in_the_United_Kin...
And the piracy site blocks are due to high court orders - not a lot an ISP can do in those cases.
Basically every bank has some kind of "premium customer" program that you qualify for by having enough investments or loans from that bank and magically all your banking fees go away (obviously they just make their money from the services they provide for your investments/loans)
The only fees I pay are a small percentage for management of mutual funds.
There is very nearly zero usefulness to overdraft protection in a real-time authorization world. Nobody charges a fee for a rejected debit authorization.
I suppose merchants might charge a return check fee for a failed ACH payment, but nobody uses ACH payments for anything routine in the US.
Water bill, electric bill, mortgage, and property taxes are all ACH for me. Many people pay rent that way. I don’t think it’s commonly used for day to day interactions but a lot of payments are still ACH
It's more handy for gas pumps, but less transparent. It stops before your tank is completely filled, but doesn't say why. You can hear the difference if you are standing there while it fills, of course, but other than that you may be confused why it slowed down and stopped exactly at a certain amount and won't go any farther.
The way it works in NL is you pay a (high like a creditcard) interest rate for every day the account is below zero. The transaction order doesn't matter it looks at the balance at the end of the day and charges you 1/365th of 13% interest.
The only way banks fuck you over in this system is with the dates. Using a card means a transaction date of "today", getting paid almost always has transaction date tomorrow. So you end up paying 1 day of interest. Much less than a $ 40 overdraft fee and regardless of the number of transactions.
1. have $10 in your checking
2. pay $9 for steak
3. buy sausage for $5
4. charge overdraft
5. buy milk for $3
6. charge another overdraft
7. pay $2 for parking
8. charge another overdraft
9. buy a pack of gum for $1
10. charge another overdraft
11. count $500 deposit
It was truly despicable behavior that benefited nobody but the banks.
-$5: $490 left
-$5: $485 left
-$5: $480 left
-$500: -$20 left, overdraft fee of $40, $-60 left.
They will reorder it as:
-$500: -$5 left, overdraft fee of $40, $-45 left.
-$5: -$50 left, overdraft fee of $40, $-90 left.
-$5: -$95 left, overdraft fee of $40, $-135 left.
-$5: -$140 left, overdraft fee of $40, $-180 left.
Yeah, the bank employees involved in this should go straight to jail.
https://www.postbank.de/dam/postbank/pdf/privatkunden/Postba... https://www.deutsche-bank.de/dam/deutschebank/de/shared/pdf/... https://www.commerzbank.de/portal/media/efw-dokumente/preisa... https://www.hypovereinsbank.de/content/dam/hypovereinsbank/s... https://www.ing.de/girokonto/konditionen/ https://www.diebank.de/content/dam/f0032-0/PDF_neu/preisaush... (Volksbank) https://www.ksklb.de/content/dam/myif/ksk-ludwigsburg/work/d... (LBBW)
In this sample, if overdraft is enabled, you pay up to 15% p.a., if disabled the cancellation fee is up to 2€ for the postal notice, but mostly just porto (0,80€).
Also note that for ATMs (including deposits) and within-bank transfers, we had no more than a couple seconds latency since €, which got expanded for all willing banks to cross-bank push transactions specifically requested to be "SEPA instant push".
The "SEPA instant push" transactions have some issues with reversing in case of accidentally fat-fingering IBAN (target account; like a crypto wallet address but no crypto) or amount. Once the money is in the target account, you basically have to go to court if it wasn't outright fraud. And being instant removes the window you had to call your bank and cancel the transfer. IIRC there are some further liability shifts.
And yes, this transparent interest-based handling is why we get by perfectly fine without credit cards.
1. have $100 in your checking 2. pay $10 for steak 3. buy sausage for $5 4. Buy a ticket for $99
You think you get one over draft fee
bank reorders it as
1. have $100 in your checking
2. Buy ticket for $99
3. buy sausage for $5
4. Pay 10 for steak
Get 2 over draft fees. Add more transactions in between the ticket purchase to increase the fees.
I have transactions that show up out of order to the event time. Thou I wouldn’t put it past some smaller banks in low regulation geographies
You cannot have law as a list of specific cases: it must be based on patterns - "All arbitrary appropriation is forbidden and sanctioned", then further made into distinct categories to substantiate and differentiate the amount of gravity. All theft is illegitimate.
Regardless, the bank's mission is to make money, and they can make a lot more of it by adversely reordering transactions in their favor, it is not at all a reach to assume that they do so, and in fact have done so and may well continue to.
Highway robbery.
Every time I tell this story it makes my blood boil.
In a way though I feel like the American system is set up to traumatize you for being poor so much that you develop the thirst to become a millionaire one day when these things don’t affect you.
It wasn't 500% of 900, it was the sum of the overdrafts on all the previous transactions.
Well it doesn’t matter what I assumed, the law said the check was no longer valid. When Wells Fargo honored it and overdrafted me they disregarded the law and said I was committing check fraud if I didn’t pay up. That’s how I ended up at US Bank, because fuck if I’m going to pay you for illegally processing my check.
Edit: and yeah I had “check fraud” on my record for years after because Wells Fargo said they didn’t care about the law and just lectured me about being responsible for checks I wrote.
A contract has a time limit, one part arbitrarily extends it and claims rights: this is completely absurd.
The lawyers I could hire are advertised on billboards and park benches on spin off TV shows.
The next morning I went in to sort it out and was told I needed to travel an hour away to the branch I had originally set up my account at. Upon arriving at my "home" branch I was told the manager was on vacation and no one else could help, but she would call me as soon as she got back. Two weeks later, having received no call, I went back in and saw the manager sitting at her desk. I closed all my accounts on the spot and never looked back.
Anyway, in my case the bank did ultimately return my $300 as they desperately tried to retain my business. Pretty sure this is another way they get away with stuff like this, just refund the squeaky wheels. "Oh, sorry for the mistake."
It's been 16 years since I worked there but I still remember this vividly. Modern banking has to be one of the biggest scams legally running and once you go below the prime segments, it's basically just exploiting the poorest and weakest to make some of the easiest money you can.
not sure that late fees or interest fee apply, unless you consider things like paying BAM late on a mortgage payment - surely has a late fee.. perhaps if you have one of those account like. free checking so long as your balance stays above 1500 or/and you use your debit card 15 times a month to push fee onto retailers.. if these are not met you could say it'd be like a late fee.
I've seen news stories that have discussed discovery of some banks structuring debits to an account with the same 24 hour period that would cause an overdraft.. so take out all the payments and then apply your deposit after those are settled - now that is super extra shady.
personally I'd just prefer them to bounce back and refuse a payment if there was not enough money in the account. Although I was charged for a bounced/bad check someone had given me at one point, so I'm guessing they could find a way to charge for similar.
Maybe I am missing the qualifier in "'private' banks" in that statement - but I've seen a lot of people pay a lot of overdraft fees and have accounts closed for them, not sure what "private" banks don't do such things, or how common uncommon.
I'm sorry, but the idea that crypto is sticking it to the man by disinter-mediating the banks is a crypto-cult delusion.
> wouldn't you think the banks would be lobbying to have it banned?
There are plenty of examples where the banks in a country no longer accepts transactions from/to cryptocurrency exchanges, Sweden being one example where it's basically impossible to deposit/withdraw SEK/EUR to your bank if they think it has anything to do with cryptocurrencies.
In a ideal world, cryptocurrencies are as protected as normal currencies, and the need for banks are still there as not everyone will run their own node and have custody over their own wallet. Banks adds extra security, something some people want.
Problem becomes when you start thinking that one solution applies for everyone. Cryptocurrencies, just like normal currencies, doesn't work for everyone. People should be free to choose, without being banned left and right for arbitrary reasons. Try getting through banks fraud departments when you make transactions from/to countries like Nigeria, and you'll know what I'm talking about.
This is a wonderful hypothetical in much the same way as spherical cows, but in the real world today, crypto is treated as a (quite volatile) speculative asset, not a way to transact everyday business. The world does desperately need fast payment processing that doesn't involve companies like Visa or MasterCard skimming off the top every time to enrich themselves and dictating one-sided terms to others (hello, OnlyFans), but I'm not seeing any evidence that crypto is poised to handle that. It's too risky. And the compatibility layer with legacy currency is too unwieldy: Every time you convert to regular currency you generate a taxable event, which is fine if you treat crypto as akin to a stock, but it'll make tax time hell if you're buying groceries and lattes and gas with it. It's not impossible to pass laws to make the best-case for crypto happen, but that would require a lot of political will that I just don't see happening; too many people benefit from the current system.
If there's a cryptocurrency that solves those problems, please let me know, I'd be interested to hear about it. But the current players all just seem like speculative bubbles for wealthy techbros to play around with. Many of which are driving electricity consumption for mining, which has, shall we say, some environmental downsides.
The restrictions on crypto are coming from regulators, not the banks, and the reason regulators aren't happy is due to the volume of criminal transactions, tax avoidance and scams enabled by crypto.
The reason the banks don't care is because at both ends of most crypto transactions you will find, er, a bank account. Crypto is only useful to the extent that it has real currency value, those Nigerian scammers and many others using crypto for transfers are just using cyrpto as an intermediate step to avoid pesky laws. That's fine as far as the banks are concerned because that's more money flowing into their systems.
Your comment presupposes that crypto solves the problem of perverse incentives. Really, it just worsens them.
So if you spend $5, $5, $5, and $40, in that order, with $38 in the bank, instead of getting one $35 overdraft fee, you get 4. It's the difference between a balance of -$52 and a balance of -$157.
I once worked at a bank where they had for a period doublecharged people for overdrafts, driving them into further overdrafts even after deposits clearly intended to cover those overdrafts had been made. The cheery low-level administrators loudly resented that they had to refund the overcharges at all, because people who kept their accounts that low were obviously deadbeats anyway.
I'm shocked that the transaction reordering is still a practice nearly 20 years later.
The first was the scam of debit cards and secured credit cards being treated fundamentally differently. They both operate basically the same way for customers (you’re only spending your own money, it’s not credit in the lending sense), but debit cards are a profit center with no credit reporting for the customer and secured credit cards can be recommended or not in any discriminatory way anyone wants (which they are).
Having the means to protect yourself is the baseline definition of a secured credit card. That’s why it’s secured. You’re starting with some positive balance and spending your own money. That’s what debit cards are too. The liberty banks take is choosing who gets to benefit from their normal spending of their own money being considered as credit at all.
0. for many aspects of life you need positive credit history to live at all
1. debit cards don’t help you build credit
2. secured credit cards (your own money! not borrowed!) do
3. both function almost the same way, but the latter is much less equally available
And if you think “living on borrowed money is a fraud”, I suppose that means you think only independently wealthy people should own homes? Nearly no one could afford to buy a home anywhere without a mortgage.
For an overdraft of 100 euros it should be like 2 cents for a day.
One of my most memorable conversations was with a rep from one of the core processors about how she makes it her mission to make sure everyone in her family opts out of overdraft protection.
Banks spend so much time on the wording to make it sound like they’re doing you a favor, I’ve had to convince my wife not we didn’t want it.
I found patio11 to be more informative before all of his writing suffered from a Stripe bias. And I found Stripe more interesting when it wasn’t trying to be the Microsoft of finance.
Edit: And so people understand how these two things — abusive banks and Stripe — are connected: revenue-envy among large corporations trying to move up the ranks and attract bigger valuations almost inevitably leads to “innovations” that are bad for the customer / community / whatever. All roads lead to Rome.
Laws were set up that explicitly made these banks very weak. Then after they inevitably failed like they were set up to do, everyone goes "omg, look! private money is so bad! time to nationalize banking and regulate everything!".
I wonder about this some times. It's truly not something I wish upon anyone, but at the same time it's almost a privilege to have live it first hand, as it's an...I was gonna say "unfortunately rare" but I think I'll go with "severely under-represented" point of view in this industry, especially silicone valley.
Also yes, overdraft fees are truly disgusting. What's worse is that there are transactions that can bypass "overdraft protection"
Totally agree. I used to work in the lending team at a UK bank. Someone on my team was on a panel discussion about change in banking, and gave a brilliantly frank answer on that point: https://youtu.be/M3toHjAABvw?t=3511
> it's an...I was gonna say "unfortunately rare" but I think I'll go with "severely under-represented" point of view in this industry
I do remember being disturbed by this. I'm from a totally privileged background myself, probably quite a bit more than the rest of us were, but still, something about watching that 'total amount lent' line increasing, it just never sat right. It felt ... profane, like a funeral director cheering because there were more car crashes this quarter. It's hard not to mentally flip that profit graph upside down.
And I'm glad that our industry is working harder to be diverse in gender and ethnicity and sexual orientation &c, but it feels like diversity in social class is still horribly neglected. It makes such a hugely palpable difference to have even one person in your team whose parents might be among the people you're lending to (or whatever it is that your company does).
I honestly don't well enough understand the sociology of software engineering to fathom why we're so silent on that particular dimension of privilege.
I suspect that, much like much of STEM, computer science requires education, which poorer folks will simply not have nearly the opportunity to even attempt.
Easy access to cheap credit is one of America’s best things but this is expensive credit. You don’t want it.
1. Initial balances: -L on BofA credit card, 0 on checking account, S in savings/investments. When I write a check I transfer money from savings or investments to checking to cover it.
2. I attempt to pay my credit card bill in full by check, but I don't get the money transferred to the checking account in time to beat the check.
3. Overdraft protection on my account kicks in, which was backed by the credit card and treated as a cash advance. That did the following:
3a. Transfer L from credit to checking
3b. Charge overdraft fee O to credit card
3c. Charge cash advance fee F to credit card
for cash advance of L+O+F
3d. Transfer L from checking to credit card
Since the credit card always had a debt of L or more on it during all that, an interest charge I for not paying off the card completely during that month was changed.
I didn't find out about this until my next statement, where the balances were: -L-O-F-I on credit card, L on checking, S-L in savings/investments.
I found this absurd and irksome for two reasons.
1. If it had been my Discover card or my Capital One card I was trying to pay off, the card balance would have ended up at 0 after all this so I wouldn't have incurred interest charges. This would have been a lower net cost than what happened.
2. My BofA card included allowing skipping the minimum payment every so often with no late penalty (it would still accumulate interest on the unpaid balance of course). If I had NOT had overdraft protection, what would have happened is that when the check bounced due to my savings/investment transfer not making it in time, I'd have been charged a bounced check fee B on checking, my "skip a payment" would have been used on the credit card, and my next statement balances would be: -L-I credit card, L-B checking, S-L in savings/investments. This would have been a lower net cost than what happened.
Edit: just saw another comment on reordering by tx size, omg https://news.ycombinator.com/item?id=29210357
Go on then... what was their argument?
"half PR" & "politically inconvenient" are an unnecessary assumption of bad faith. Patio11's not doing PR or propoganda.
Disagree and/or add to the discussion as you see fit, but let's try to be a little more generous... especially to a member with such a history of contribution to the community.
An employee of a multinational financial services company writes a historically revisionist article about an area in which his company has direct regulatory and financial exposure.[1] With only implicit disclosures of conflict of interest. I would say that it is only because of the author’s long-term goodwill in this community that this stuff isn’t looked upon with a very critical eye.
I’ve learned the hard way that someone’s past identity does not necessary correlate with good behavior in a new, more “important” persona. Silicon Valley is filled with examples of exactly this sort of thing.
1: Remember, the former Governor of the Bank of England is on his employer’s board. This isn’t a passionate evangelist for a struggling startup charity case, or someone telling us cool facts about their weird hobby.
I don't see how we can get anywhere discussing like this. Instead of discussing the topic, it's all meta. Ad hominems, characterizations of the argument and accusations of bad faith.
As I said, disagree and make your case. You don't have to assume credibility, but don't assume malice. What's the point of having a discussion if it's not a good faith discussion.
Yes. The “big banks lost money servicing the poor people” narrative is totally wrong, and the author knows this. We can’t let this incorrect story get more traction than it already has. Too many innocent people suffered great hardships in the real story of what happened — look at the stories in this thread!
> What's the point of having a discussion if it's not a good faith discussion.
Edward Bernays might have a few ideas.
I was once in a meeting with one of the senior executives at JPMorgan, where the guy smugly told me he felt they were “doing a service for the community” by charging people overdraft fees. After leaving the meeting, my very senior colleague said, “I had to hold myself back from throwing that guy out of his window.”
These sorts of articles — half PR, half history lesson — tend to leave out these sorts of politically inconvenient but important bits of history. It’s so much work to unpack the bias...