[Marxism] Banks rely more on gouging workers with "penalty" fees

LouPaulsen at comcast.net LouPaulsen at comcast.net
Tue Jul 6 13:15:22 MDT 2004

>From today's Wall Street Journal (probably not available on line for free): a story about how banks rely on squeezing their worker-debtors with penalty fees for more and more of their profit.  Some fair-use excerpts follow.  Lesson #1 is that they are greedy capitalists, but we knew that.  Lesson #2 is that this is a damn shaky recovery if bank profits depend largely on squeezing the last drop of blood out of workers who are their debtors and who are one inch short of bankruptcy!  

Growing Profit Source for Banks:
Fees from Riskiest Card Holders

Late Payers and Big Borrowers Are Becoming Cash Cows

[An X-ray technologist had the interest rate on her MBNA card raised to 24.98%.  The representative] pointed out that she had run up more than $5000 of debt on two other cards.  Also, she was making only slightly more than the minimum suggested monthly payments on her MBNA card.  He said the company now saw her as a credit risk and feared it would take her forever to pay off her debts.  "Isn't that what you want consumers to do?" she snapped back.  [...]

Card users, consumer advocates and some industry experts complain that banks are attempting to squeeze more and more revenue from consumers struggling to make ends meet.  Instead of cutting these people off as bad credit risks, banks are letting them spend - and then hitting them with larger and larger penalties for running up their credit, going over their credit limits, paying late and getting cash advances from their credit crds.  The fees are also piling up for bounced checks and overdrawn accounts.

Penalty fees aren't new, but they are becoming more important to the industry's bottom line and are being borne by the people who can least afford to pay them, [says a consultant.]  

Cardweb.com, a consulting group that tracks the card industry, says credit-card fees, including those from retailers, rose to 33.4% of total credit-card revenue in 2003.  That was up from 27.9% in 2000 and just 16.1% in 1996.  The average monthly late fee hit $32.01 in May, up from $30.29 a year earlier and $13.30 in May, 1996, the company said.  In 2003, the credit-card industry reaped $11.7 billion from penalty fees, up 9% from $10.7 billion a year earlier...

Banks are charging as much as $32 per transaction when customers write a check or make a debit-card purchase without enough money in their accounts to cover the payment.  Five years ago, $20 was more typical.

[A hospital worker] used her Bank of America debit card on Jan. 28 of last year to make four small purchases, including a $2.27 cup of cafeteria soup.  But several checks she and her husband had written also hit their account that day.  When the bank tallied up the account later that day, it posted some of the checks before the debit-card charges, which had already been cleared at the register.  That left the account overdrawy by $40.17.  [The cardholders] were hit with separate $28 "insufficient fund" fees for two checks and all four debit-card transactions, hitting the maximum daily penalty of $140.  ... {The worker's husband] later learned that subtracting the biggest check first is standard procedure for Bank of America. 

[This reminds me of Lenin's article on the system of fines in factories in Russia in ? 1902 ? or so, except that the point of the WSJ article seems to be to warn banks of a potential future customer-relations issue.]

Lou Paulsen
(e-mail connection will be spotty until Friday at least)
(I hope this comes out looking halfway OK - am using a stupid web application)

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