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Kohn Warns Less Fed Autonomy May Cause Higher Rates

Federal Reserve Board Vice Chairman Donald Kohn said any “substantial erosion” of the central bank’s... more

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5 hours ago

Banks' 'courtesy' loans at soaring rates irk consumers

Even as regulators crack down on abusive mortgage and credit card practices, another type of lending threatens to mire consumers in a credit trap.

It's called "courtesy overdraft" and has long been used by banks to automatically pay transactions that account holders don't have the money to cover — and then charge them a steep fee. For years, banks have made it easier for customers to overdraw their checking accounts, aided by a cottage industry of consultants who make big money by helping to wring fees out of consumers, a USA TODAY analysis finds.

But what began as a customer service has often become an important revenue driver for banks at the expense of the most vulnerable consumers, according to bank memos reviewed by USA TODAY and interviews with industry insiders.

"This practice has gone awry and needs to be fixed," says Alex Sheshunoff, a key consultant who once advised banks to pay, not return, overdrawn transactions. "This is something everyone should be trying to find a solution to, not fighting."

Today, each of the nation's 10 largest banks allows consumers to overdraw with checks, debit cards or at ATMs, a 2009 USA TODAY survey reveals. Large banks also reserve the right to process large transactions first, triggering more overdraft fees by emptying the account more quickly. Some even charge consumers before they overdraw by deducting a purchase when it's made, rather than when it clears, pushing the account into the red sooner.

President Obama signed legislation in May limiting certain credit card practices — such as rate increases on existing debt — that have pushed consumers deeper into distress in a sliding economy. The government also wants to create a consumer protection agency to supervise loans. Meanwhile, the Federal Reserve is examining the fairness of certain overdraft practices.

It's unclear whether those efforts will be enough to rein in overdrafts, now the single-largest driver of consumer fee income for banks. In 2009, banks are expected to reap a record $38.5 billion from overdraft fees, nearly twice the $20.5 billion they stand to collect from credit card penalties such as late and over-limit fees.

Banks say consumers can avoid overdrafts by keeping track of their money. Consumers contend, though, that banks' policies make it challenging to avoid fees.

Faith Gordon, 48, recently sued BB&T bank for allegedly "delaying and rearranging" transactions to maximize overdraft fees. Gordon, of Atlanta, says banks should change their practices and "be fair to us customers."

BB&T spokesman Bob Denham says the lawsuit "lacks merit." The bank "categorically (denies) delaying the posting of items to create overdrafts," he adds.

Eric Halperin of the Center for Responsible Lending says regulators should examine bank overdraft rules because they "parallel" much-criticized card policies. Banks are raising fees and imposing similar policies on checking accounts and credit cards, such as charging more for multiple transgressions. The Federal Deposit Insurance Corp. says if banks cover a $20 purchase and charge a $27 fee, the loan has a 3,520% annual percentage rate (APR) if paid back in two weeks.

Senate Banking Committee Chairman Chris Dodd, D-Conn., said if the Fed doesn't curb overdraft abuses, he'll "pursue legislative action." Rep. Carolyn Maloney, D-N.Y., has sponsored legislation requiring banks to get consumers' permission to cover overdrafts, disclose APRs and pay transactions in a way that doesn't increase fees.

Banks are lobbying heavily against restrictions. Why? "Overdraft fees are the mother lode of (deposit) fees," says Michael Moebs of Moebs Services, an economic research firm. "If it weren't for overdraft fees, 45% of banks and ceedit unions wouldn't have made money in 2008."Even as regulators crack down on abusive mortgage and credit card practices, another type of lending threatens to mire consumers... more

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5 hours ago

US takes 1,350 Palestinian refugees

The State Department confirmed today that as many as 1,350 Iraqi Palestinians – once the well-treated guests of Saddam Hussein and now at outs with much of Iraqi society – will be resettled in the US, mostly in southern California, starting this fall.

It will be the largest-ever resettlement of Palestinian refugees into the US – and welcome news to the Palestinians who fled to Iraq after 1948 but who have had a tough time since Mr. Hussein was deposed in 2003. Targeted by Iraqi Shiites, the mostly-Sunni Palestinians have spent recent years in one of the region's roughest refugee camps, Al Waleed, near Iraq's border with Syria.

"Really for the first time, the United States is recognizing a Palestinian refugee population that could be admitted to the US as part of a resettlement program," says Bill Frelick, refugee policy director at Human Rights Watch in Washington.

Given the US's past reluctance to resettle Palestinians – it accepted just seven Palestinians in 2007 and nine in 2008 – the effort could ruffle some diplomatic feathers.

For many in the State Department and international community, the resettlement is part of a moral imperative the US has to clean up the refugee crisis created by invading Iraq. The US has already stepped up resettlement of Iraqis, some who have struggled to adjust to life in America.

The resettlement of Iraqi Palestinians is "an important gesture for the United States to demonstrate that we're not heartless," says Alon Ben-Meir, a professor of international relations and Middle Eastern studies at New York University.

But some critics say the State Department is sloughing off its problems onto American cities, especially since in this case the Palestinians were sympathizers of Hussein, who was deposed by the US.

"This is politically a real hot potato," says Mark Krikorian, director of the conservative Center for Immigration Studies in Washington, adding, "[A]merica has become a dumping ground for the State Department's problems – they're tossing their problems over their head into Harrisburg, Pa., or Omaha, Neb."The State Department confirmed today that as many as 1,350 Iraqi Palestinians – once the well-treated guests of Saddam... more

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Obama's new NIH chief links God, science

President Barack Obama is choosing an influential scientist who helped unravel the human genetic code — and is known for... more

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6 hours ago

Can there be another Jackson icon in Internet era?

The extravagant mourning for Michael Jackson has some critics wondering whether the pop singer's global superstardom could... more

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9 hours ago

NYSE, DHS, the White House hit by Cyber Attack

U.S. and South Korean computer networks were besieged for days by a series of relatively unsophisticated attacks, possibly from... more

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9 hours ago

CIA lied repeatedly to Congress since 2001, says CIA Director Leon Panetta

WASHINGTON — CIA Director Leon Panetta told Congress last month that senior CIA officials have concealed significant actions... more

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10 hours ago

Did nano-thermite take down the WTC?

Could the most audacious terrorist attack in history be a “sophisticated masterpiece of demolition”? That’s... more

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13 hours ago

Racism, discrimination widespread inside Houston Fire Department

Just one day after racist and sexist graffiti was found written outside the women's quarters at Fire Station 54, an emotional Fire Chief Phil Boriskie addressed another racist incident. It happened just before 7 a.m. Wednesday.

The racist message, which included the "n" word, was broadcast over the firefighters’ radio system and lasted seven to eight seconds. HFD strongly believes someone from the outside is responsible. They think someone hacked into their frequency. Whether the message originated from the outside or not, several women, who either currently work for the fire department or have since retired, say they are not surprised by the recent incidents.

“I mean, let’s be real. I didn’t come in with a blind eye to where I was working. I am at a place where it is a majority of white males,” said veteran female firefighter Vantrece Williams.

Williams says she's been harassed, but nothing was ever done about it. Mainly because she says many firefighters won’t speak out when they witness something bad taking place.

“If we want to continue being on TV with the negative images, then we just continue to be quiet,” said Williams.

11 News heard allegations of women firefighters being groped by their male co-workers, and an allegation of a male firefighter masturbating over a female co-worker while she was trying to sleep in her bed.

“You see it. It gets to the point, because nothing ever happens, that you have to pick your battles,” said Williams

During a Wednesday night press conference, two more women firefighters shared their stories about incidents that have happened within the department.

"I'm risking my life to save other lives, and I have to worry about my co-workers writing 'die'," said Houston firefighter Paula Keyes.

The other woman, Jane Draycott, said she transferred to the station after her 17-year-old daughter died in a car accident. She felt she could not face another accident scene, but wanted to serve in other ways.
"They defaced my daughter's picture and wrote 'dead' on her face, and they wrote 'die' on my face. It was a 5 x7 photograph of her sitting on my lap," said Draycott. Draycott has filed two complaints since April about incidents that happened at Station 54. She says that without resolution, the problem won't stop.

"We want to be safe at work," said Keyes.Just one day after racist and sexist graffiti was found written outside the women's quarters at Fire Station 54, an... more