Ah, for the good old days when bankers made money by providing useful services – taking deposits and making loans, for example. Is it too much to expect bankers to make money honestly rather than through hidden fees and “gotcha” programs?

Now the New York Times reports a massive effort in the industry to keep fees rolling in from overdraft charges, and they are alarmed by US regulatory efforts to restrict this source of income. The issues are similar in the UK where “free” accounts have made banks look to other sources of income, often overdraft charges against some of the least able to afford them.

“So many people now dip their balance below zero that banks generated an estimated $20 billion from overdraft fees on debit purchases and ATM. transactions in 2009, according to Michael Moebs, an economist who advises banks and credit unions. All of this revenue is potentially at risk, since these are the two areas that the new Federal Reserve regulations cover. (Banks generate an extra $12 billion by covering checks and recurring bills; under the new rules, they can still cover those and charge fees without customers’ consent.)”

Customers could still incur more than $100 in fees a day if they opt to take overdraft coverage, says The Times.

Do regulators have to force the banks to be honest?

Filed under: Retail Banking, Technology