Afflicter All About Accountability

Debit Card Fees Keep Half of Banks in Business?

There are some fascinating statistics in today’s New York Times story about banks’ use of misleading and poorly disclosed debit card fees.

Rep. Carolyn Maloney, D.-N.Y., is proposing legislation that would require banks to warn consumers when debit card transactions would overdraw their accounts.  Her legislation would also ban banks from the common practice of crediting expensive transactions to customers’ accounts first, which can lead to more overdraft fees.

Seems rational but banks are, of course, resisting. The Times quotes Michael Moebs, an economist who advises banks, to explain why: Moebs says that Maloney’s legislation would cause as many as 2,000 banks and credit unions to fail within the next two years. By Moebs’ calculation, about 45 percent of the nation’s banks would be unprofitable if they weren’t able to charge those overdraft fees.

The Afflicter questions whether the failure of these banks would be an entirely bad thing. We speculate that their business would just be taken over by competitors who are able to make money without misleading their customers.