My credit union, Trustone Financial, sent me an Overdraft Authorization solicitation today:
Correct me if I’m wrong, but when you receive a letter from a financial institution you have a business relationship with that says “ACTION REQUIRED” on the cover, the enclosed information should have something to do with taking action on something that’s, you know, required.
But, that wasn’t the case in this case. Instead, Trustone simply wanted me to opt-in to allowing them to charge me more money. Opt-in does not equal action required.
This manipulative request from Trustone appears to be in response to the Federal Reserve’s rule change last year where they told financial institutions that they could charge overdraft fees to customers on debit card transactions only after receiving permission from their customers to do so.
For example, had I used my debit card to pick up a cappuccino at Cuppa Java this morning, but had less than $5 in my checking account at the time, my credit union could take a few different actions:
1. Deny the charge, causing potential embarrassment to me, but saving me from buying something I clearly couldn’t afford. Or, perhaps just using a different card.
2. Pull the money from a savings account or line of credit to cover the expense.
3. Let the charge go through, then charge me a $30 overdraft fee.
4. Let the charge go through, knowing that I’ve been a loyal customer for 20 years and am probably good for it. (LOL.)
Situation #3 is the sticker here. They can no longer do that if I don’t fill out their authorization form. Because I haven’t given them permission to charge me an outrageous fee, they can’t.
This can get particularly ugly for people who are living check to check. Getting hit with even one of those $30 charges can set off a cascade of additional overdrafts, thus more $30 fees, thus more overdrafts. At Trustone, the death spiral can continue until you’re $800 in the hole. At that point, they decline additional debit charges rather than continuing to bury you. I’m not sure if that size of a hole was determined to be the most punitive someone with little money can recover from, or if it’s set by the government, but I suppose it’s nice to know that it ends somewhere.
So, Trustone, if you really think that it benefits me to opt-in to receive $30 charges when attempting to buy things I must not be able to afford, break it down for me. Frankly, this seems WAY more expensive than putting the same charge on a high interest credit card where a $5 cappuccino could ride along at 20% interest for a decade before becoming more expensive than one $30 overdraft fee, but I’m willing to listen.