- Ban all overdraft fees on debit card and ATM transactions. These transactions can easily be declined at the point of purchase, at no cost to the consumer. The only reason for doing it the way we do it now is to shovel more money into the banks' coffers.
- Lower fees, and make them proportional to the amounts involved. The average large bank charges $35 per overdraft. That's ridiculous. It simply does not cost banks $35 to extend a short-term loan to a customer --- especially since most transactions are for extremely small amounts. Rather than being a profit center for banks, overdraft fees should be proportional to banks' actual costs, just as the FDIC requires of penalty fees on credit cards.
- Overdrafts by paper check cannot be automatically declined. If a customer incurs six such overdraft fees in 12 months, they should be given the option of paying off those short-term loans (which is what an overdraft fee is) in installments.
- Ban payment chicanery. Many banks and credit unions have stopped processing purchases and ATM withdrawals as the transactions happen. Instead, they post the biggest transactions first, hoping to drive customers over the limit. This must end. Customers have the right to expect that their transactions are being processed as they are made, and that they are not being forced into paying high fees by bank trickery.
- If banks want to extend credit by way of overdraft fees, they need to tell customers exactly what the APR is on each short-term loan.
Predation is as old as the food chain, and it is nature's way to favor the strong. But we're building a civilization, not a Darwinian theme park. For our nation to move forward, we must broaden opportunity and strengthen each individual's prospects of success. Above all, we must not allow the most vulnerable members of our society to be tricked and exploited to fatten the sharks circling among us. Success is a good thing, but not at the price of our soul. We can do better than that.
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.