Tuesday, March 8, 2016

Personal Responsibility: Overdrafts

In one of my, You Might Be A Progressive, series, I posted one that created quite a bit of discussion. You might be a progressive if you believe a bank should loan you money for free in the form of overdrafts. The statement doesn't fully represent an overdraft, but it did create discussion on the topic of bank overdraft fees.

Earlier in the day, I had a progressive complain about the billions charged to bank customers because of overdraft fees. A progressive on Twitter, a Bernie Sanders fan, said, “Banks collected over $30 billion in overdraft fees last year from people who could ill-afford it.”

This is classic progressive thinking. I have no reason to doubt the $30 billion figure and don't deny that these fees are set high and increases company profits. What progressives don't understand, overdraft fees aren't solely motivated by profit. These fees are to dissuade people from writing checks for amounts greater than their balance. Intentionally writing a bad check is against the law even if you plan on depositing funds to cover that check before it clears.

Progressives have been taught that banks are evil. Even religions often refer to banks/lenders as being evil. This is not to say there isn't some cause for concern. Throughout history, banks and government have, too often, colluded to oppress citizens.

How often have we seen stories like Scrooge or A Wonderful Life where banks are taking homes and kicking children out onto the streets? There are many stories where evil bankers have taken a farmer's land because blight destroyed crops and he couldn't meet his mortgage payment. These days, there is government insurance to cover such problems. There is insurance available that will pay your home mortgage payment if you lose your job and can't make your monthly payment.

The simple fact is, when you enter into a contract, whether it's to buy a home or to use a bank's checking services, there are certain requirements. As with any contract, both parties must honor the agreement.

All my life, I have known people who have knowingly written bad checks because they didn't have money to pay a utility bill. This does buy time so that their utility won't be disconnected. The consumer knows they can make a deposit that Friday before the bank clears the check. There are many times the consumer owes more than their weekly income will cover and they are charged an overdraft fee.

Why do progressives care when the consumer knows the risks when writing a bad check? Progressives are taught to hate banks and corporations. Large corporations are seen as heartless. They actually are, for the most part, because a corporation is a set of rules. The people with whom the consumer does business is simply an employee who, if they want to keep their job, must follow the rules.

Progressives demands that government control banks and make them act more human. Have these people actually done business with the government? There is no entity in the country that is more heartless than government. They suffer the same problem as corporations, employees who must follow the rules or risk being fired.

The problem lies with consumers. Most people seem to have no economic sense. There are many reasons people end up paying overdraft fees, but, too often, it's because of their own bad judgment. You will find that many of these people have $700 smartphones, cable television, and cars that cost three times their annual income. Add this to a home they can ill-afford. 
I have watched people with college degrees spending far more than their annual income. These people live day to day. Yet when they are charged an overdraft fee, they complain about the evil bank. It seems to be instinct for people to blame anyone other than themselves for their own mistakes. This is the way progressives think—that nothing can be their fault. Their instinct is to have government protect them from themselves. But I ask, who is going to protect them from government. We can always find a bank that offers overdraft protection, or one that will excuse a certain number of overdrafts, but you cannot find a different government. When government makes mistakes or simply doesn't care, there is no recourse.

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