Mark Winston Griffith

Protection from the Protection Racket

In a recent blog and in an article that appeared in today's Daily News I rail against the New York State Banking Department's proposal to allow NY State chartered banks to offer overdraft protection, a product which is designed to prey on low- and moderate income neighborhoods where consumers are struggling to pay their monthly bills.

The Neighborhood Economic Development Advocacy Project recommends that a better Banking Board proposal on overdraft protection would include:

- A prohibition on applying overdraft protection features to ATM withdrawals.
- Restricting banks from making overdraft protection a feature of Basic Banking checking accounts, which are designed to be affordable for low- income and fixed income customers.
- Exempting public benefits from recovery of overdraft protection charges.
- Limiting overdraft protection daily fees from being charged after the seventh day of an unrecovered overdraft

Make no mistake about it, allowing State chartered banks to offer overdraft protection is a bad idea, period. In addition to setting a cruel fee trap, it erodes the consumer protection value of State banking regulations. The bottom line is that if the Banking Department is determined to make overdraft protection a fact of life for all New York banking consumers, there is still a more humane and fair way to regulate it.

Mark Winston Griffith: Author Bio | Other Posts
Posted at 12:46 PM, Nov 02, 2005 in Banking | Middle-class squeeze
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