Debit cards fuel overdraft outrages – The Red Tape Chronicles

from MSNBC.com

Posted: Tuesday, January 30 at 01:03 am CT by Bob Sullivan

Forty dollars for a Big Mac? That might sound over the top, but it barely tips the outrage meter when you compare it to the 20,000-percent-interest loanU.S. consumers regularly take out to pay for such $40 burgers. How could this be?

Well, bounced checks just aren’t what they used to be.

A new study says that most of the time consumers overdraw their accounts now, bounced checks aren’t the culprit. Instead, debit card purchases are chief cause of overdrafts.

Many people don’t realize that a carefree swipe of their debit card at a point-of-sale terminal to buy a Big Mac could result in “courtesy overdraft” fee of $30 or more. But such fees are becoming increasingly common. When faced with a transaction that would send a consumers’ account into negative territory, banks now regularly approve such transactions, cover the expense, and charge hefty fees.

Financial institutions collected some $10 billion in 2005 through what’s sometimes called automatic overdraft protection, according to the new study conducted by the Center for Responsible Lending. The agency reviewed full transaction histories for 5,000 typical American households to determine the cause of bounced check fees.

In its report, called “Debit Card Danger,” the Center for Responsible Lending said that 38 percent of overdrafts were caused by debit card, point-of-sale transactions, while paper checks triggered an overdraft only 27 percent of the time. Online bill payments accounted for another 27 percent of overdrafts.

Most consumers have no idea
The trend concerns Eric Halpern, who co-authored the report. He believes many consumers still have no idea how expensive that Big Mac can be.

“If you ask people on the street what would happen if they tried to make a debit card purchase and their account was empty, most people assume the bank would deny it,” he said.

Not any more. Beginning several years ago — no one really knows when — banks slowly got into the business of granting short-term, high interest loans to consumers when they attempt to overdraw their accounts. Account holders are automatically enrolled in the programs, which are now standard at nearly all banks.

Why are the programs, which many people have never heard of, so popular? Financial institutions that adopt them can expect a huge spike in overdraft revenue — a spike of 200 to 400 percent, according to the Center for Responsible Lending.

It’s clear these loans confuse consumers. When asked, 61 percent said they wished the bank would simply reject the transaction.

Courtesy overdraft can save consumers money in the world of paper checks. The fee is the same as a standard insufficient funds fee, but consumers who would have bounced checks without it won’t face additional fees from merchants.

But the advantage ends in the electronic transaction world. Consumers who are unaware of courtesy overdraft do not know that the price of their Big Mac can jump from $1.99 to $42 in an instant.

It’s true, as bankers like to say, such fees are avoidable. Consumers can keep tabs on their balances, and as long as they do not live near the edge, dangling their balance near zero, they will never see this fee. And in fact, most consumers never pay overdraft fees. Every consumer who spends money they don’t have bears responsibility for that.

But banks shoulder the blame, too, for making it so easy to overdraw — and for muddying the line between “where the consumers’ balance ends and the overdraft protection begins,” said Greg McBride, a senior financial analyst at Bankrate.com.

Remember the surge of marketing that began a few years ago encouraging consumers to use debit cards instead of credit card for purchases? Debit cards were supposed to be the safer tool, the preferred tool for consumers trying to be responsible about their personal finances. Because debit-card buyers draw instantly from their own money in their checking accounts, they do not run up high-interest, revolving credit card debts. The implication, of course, was that debit cards would not allow you to spend what you don’t have.

Scratch that.

There are other factors that make it easier to fall prey to courtesy overdraft fees. Balancing a checkbook has become a much more complex affair. In an age of Internet banking and multiple automatic payments and deposits, it is easy to lose track of account balances day by day.

Lopsided changes
In addition, the advent of electronic check processing (called Check 21) has meant check deductions are drawn faster from consumers’ accounts — but deposits are still commonly held for three to five days. So consumers need a healthy cushion in their accounts to avoid the near occasion of overdraft sin, and not everyone has such a cushion.

“This hits families who are living paycheck to paycheck,” said Halpern. “It is likely at (any) point in time that the consumer does not know their exact balance. But the bank knows the exact balance.”

Banks could warn consumers that an overdraft is imminent, he said. But instead, they approve the transaction and collect the fee.

“This is a situation where the bank has much more information than the consumer,” he said.

Liz Pulliam-Weston, author of “Deal with Your Debt,” and MSN.com personal finance columnist, says that there are easy ways for consumers to protect themselves from overdraft fees. With a simple phone call or visit to a branch, consumers typically can link their checking accounts to their savings account or credit card. Then, if an overdraft occurs, the money to cover the purchase will be drawn from their other accounts. A small fee will apply, but it will generally be a tiny fraction of the potential courtesy overdraft charge. Consumers can also apply for a bank line of credit and link that to their checking account, Weston said.

Many consumers may be confused by the various names for overdraft protection – bounce protection is costly, courtesy overdraft is costly, traditional overdraft protection is not.

But Weston offers a simple rule of thumb. If you are using your own money to cover an overdraft, that’s inexpensive. “But, if you are borrowing the bank’s money, that’s expensive,” she said. “Everyone should have true overdraft protection.”

Online banking can help also, she said. While bank Web sites don’t always provide an exact,up-to-the-moment balance because transactions may not post immediately, the sites are useful for monitoring balances.

There’s one more warning consumers should have, Weston said. Not only can they unknowingly overdraw by making debit card purchases, but they can overdraw while getting cash from ATMs, too. That might not sound possible — after all, once upon a time, ATMs would simply deny withdrawals that exceed balances.

Scratch that, too.

Banks ignore customer data
Many banks now allow consumers to withdraw money from the kitty included in the automatic overdraft protection. Bank customers hate this idea – only 2 percent said they wanted banks to permit such withdrawals and tack on their overdraft fees. Most said they’d rather the withdrawal was rejected.

Instead, banks seem to be encouraging the use of these short-term loans to get cash, perhaps as a way of competing with the tide-you-over short-term loans offered by various paycheck advance loan retail stores. There are reports that banks even pad the “available balance” displayed on ATMs with amounts from the courtesy overdraft kitty. In other words, a consumer might only have $50 in their account, but an ATM might indicate a $250 “available balance.” Then a $100 withdrawal would incur that $39 overdraft fee.

It’s not clear how common the practice is — the matter is being examined now by a federal agency in a major overdraft fee study that’s due late this year. But McBride said it is indeed happening.

“It’s elusive to pinpoint how prevalent this is … but I know anecdotally that it’s happening,” he said.

The problem doesn’t appear to be extensive. In the Center for Responsible Lending study, only 2 percent said they’d been forced into overdraft protection by an ATM withdrawal.

Still, the only real defense against an ATM that might lie to you about your balance is to keep your own cushion in the account.

Labor Union, Redefined, for Freelance Workers

By STEVEN GREENHOUSE
Published: January 27, 2007
New York Times

Herding freelancers is a bit like herding cats. Both are notoriously independent.

Nonetheless, Sara Horowitz has figured out a way to bring together tens of thousands of freelancers — Web designers, video editors, writers, dancers and graphic artists — into a thriving organization.

Ms. Horowitz has founded the Freelancers Union, offering members lower-cost health coverage and other benefits that many freelancers often have a hard time getting.

A former labor lawyer, Ms. Horowitz intends to form a forceful advocacy group for freelancers and independent contractors, the most mobile members of an increasingly mobile work force. In addition, she is trying to adapt unions to a world far different from yesteryear, when workers often remained with one employer for two or three decades.

“This really is about a new unionism,” she said, “and what it means is to bring people together to solve their problems.”

Having signed up 40,000 freelancers from the New York area, she is now planting her group’s flag across the nation, hoping to herd far more of the nation’s 20 million freelancers and independent contractors into her union.

“These workers are the backbone for so many industries vital to our nation’s economy — I.T., financial services, the arts, advertising and publishing,” she said. “Yet these same workers are not afforded simple job protections or a social safety net.”

By creating a new type of union for nontraditional workers, Ms. Horowitz hopes to help revive the labor movement. Its membership has slipped to just 7.4 percent of the private-sector work force, down from one-third in 1960.

Unlike traditional unions, the Freelancers Union has no intention of bargaining with employers. Still, Ms. Horowitz says her group’s main goal is identical to that of all unions — providing mutual aid, in this case health benefits, to their members.

“More and more people are not going to get their benefits from an employer,” Ms. Horowitz said. “Our ultimate goal is to update the New Deal. It is to create a new safety net that’s connected to the individual as they move from job to job.”

Jennifer Lebin joined the Freelancers Union while living in Manhattan after seeing one of its subway ads that say, “Welcome to Middle-Class Poverty.” Ms. Lebin, a political consultant, bought the group’s health coverage and paid $20 to attend a union-sponsored seminar offering tax advice to consultants and independent contractors.

Ms. Lebin, who has moved to Chicago, expressed disappointment that she could no longer use the union’s health plan — doctors in Illinois are not part of the network. “If there is a way that the Freelancers Union could offer the same benefits to members outside the New York area, I’d sign up in a heartbeat,” she said.

The Freelancers Union, which sells benefits à la carte, hopes to offer health benefits in 10 states by the end of this year. It is already offering its discounted disability and life insurance nationwide.

More than 14,000 freelancers in the New York area have bought its health insurance, generally for about $300 a month, some 40 percent below what they would normally pay elsewhere. The organization has also used its group purchasing power to help freelancers obtain discounted dental, disability and life insurance.

Membership in the Freelancers Union is free. To finance itself, the group uses an entrepreneurial model: it earns modest commissions on the benefits that its members buy.

Robert Bruno, a professor of labor relations at the University of Illinois at Chicago, praised the group’s innovative approach, although he said it could not replace traditional unions.

“This needs to be part of labor’s repertoire,” Professor Bruno said. “To the degree it helps to reshape what we’ve come to understand what a labor organization is, it’s all to the good.”

Ms. Horowitz, 44, won a MacArthur genius award in 1999 after she established Working Today, a group based in Brooklyn that focused on providing benefits to New Yorkers in flexible work arrangements. She founded the Freelancers Union in 2003, with a more ambitious vision.

The group intends to do advocacy work just like a labor union. In New York, it is backing legislation to let freelancers obtain unemployment insurance. Even if freelancers are laid off after working for an employer for two years, they cannot receive unemployment benefits because they are considered independent contractors.

Some members do not expect the group to play the role of a traditional union.

“Unions represent members in negotiating wages and benefits,” said Barbara Scott, an artist in Berlin Center, Ohio. “I don’t see the Freelancers Union functioning that way. I see it as a networking tool.”

Bobby Ambrose, a graphic designer in Chicago, disagreed.

“I was hoping that they would be like a labor union,” Mr. Ambrose said. “There are a lot of situations that freelancers face regarding pay rates and job hours, like when you’re doing full-time work when you’re only hired to be part time. It would be nice if they could push to make things better.”

Several traditional unions are studying the freelance union’s progress, perhaps to borrow some ideas on organizing nonunion workers and offering benefits.

“The labor movement,” Ms. Horowitz said, “went from guilds through mutual aid societies through craft unions and through industrial unionism. You’re not going to persuade me that there is not going to be a new form of unionism. The story’s not over on what we’re creating.”

Saturday, January 27 at 8PM
Arthur Magazine and Drag City presents…
Trinie Dalton and Steve Krakow

Ms. Dalton, author of Wide Eyed (Akashic Books) and co-editor of the wonderfully weird Dear New Girl or Whatever Your Name Is (McSweeney’s) will read from her yet-to-be-finished novel. Her writing has appeared in Arthur, LA Weekly, Bomb, Nerve.com, Purple, and The Believer. When not playing guitar hero for reals in Plastic Crimewave Sound, Mr. Krakow writes, edits and draws the mind-expanding psychedelic pop hurricane called Galactic Zoo Dossier. Together, they will have an amicable chat about zines, weird Americas old and new, and other subcultural curiosities.

Trinie Dalton & Plastic Crimewave Steve Krakow
Saturday, January 27th, 8pm, FREE
Quimby’s Bookstore
1854 West North Ave.
Chicago, IL 60622
www.quimbys.com

(Courtesy Astrid!)

from alternet.org

The Radical Christian Right Is Built on Suburban Despair
By Chris Hedges, AlterNet. Posted January 19, 2007.

Millions of Americans live trapped in soulless exurbs which lack any kind of community, leaving them feeling isolated and vulnerable. Without alternatives for their social despair, they flock to demagogues promising revenge and a mythical utopia.

The engine that drives the radical Christian Right in the United States, the most dangerous mass movement in American history, is not religiosity, but despair. It is a movement built on the growing personal and economic despair of tens of millions of Americans, who watched helplessly as their communities were plunged into poverty by the flight of manufacturing jobs, their families and neighborhoods torn apart by neglect and indifference, and who eventually lost hope that America was a place where they had a future.

This despair crosses economic boundaries, of course, enveloping many in the middle class who live trapped in huge, soulless exurbs where, lacking any form of community rituals or centers, they also feel deeply isolated, vulnerable and lonely. Those in despair are the most easily manipulated by demagogues, who promise a fantastic utopia, whether it is a worker’s paradise, fraternite-egalite-liberte, or the second coming of Jesus Christ. Those in despair search desperately for a solution, the warm embrace of a community to replace the one they lost, a sense of purpose and meaning in life, the assurance they are protected, loved and worthwhile.

During the past two years of work on the book American Fascists: The Christian Right and the War on America, I kept encountering this deadly despair. Driving down a highway lined with gas stations, fast food restaurants and dollar stores I often got vertigo, forgetting for a moment if I was in Detroit or Kansas City or Cleveland. There are parts of the United States, including whole sections of former manufacturing centers such as Ohio, that resemble the developing world, with boarded up storefronts, dilapidated houses, pot-hole streets and crumbling schools. The end of the world is no longer an abstraction to many Americans.

Jeniece Learned is typical of many in the movement. She stood, when I met her, amid a crowd of earnest-looking men and women, many with small gold crosses in the lapels of their jackets or around their necks, in a hotel lobby in Valley Forge, Pennsylvania. She had an easy smile and a thick mane of black, shoulder length hair. She was carrying a booklet called “Ringing in a Culture of Life.” The booklet had the schedule of the two day event she is attending organized by The Pennsylvania Pro-Life Federation. The event was “dedicated to the 46 million children who have died from legal abortions since 1973 and the mothers and fathers who mourn their loss.”

Learned, who drove five hours from a town outside of Youngstown, Ohio was raised Jewish. She wore a gold Star of David around her neck with a Christian cross inserted in the middle of the design. She stood up in one of the morning sessions, attended by about 300 people, most of them women, when the speaker, Alveda King, niece of Dr. Martin Luther King, asked if there were any “post-abortive” women present. Learned ran a small pregnancy counseling clinic called Pregnancy Services of Western Pennsylvania in Sharon, where she attempted to talk young girls and women, most of them poor, out of abortions.

She spoke in local public schools, promoting sexual abstinence, rather than birth control, as the only acceptable form of contraception. And she had found in the fight against abortion, and in her conversion, a structure, purpose and meaning that previously eluded her. The battle against abortion is one of the Christian Rights’s most effective recruiting tools. It plays on the guilt and shame of woman who had the abortions, accusing them of committing murder, and promising redemption and atonement in the “Christian” struggle to make abortion illegal, in the fight for life against “the culture of death.”

Her life, before she was saved, was, like many in this mass movement, chaotic and painful. Her childhood was stolen from her. She was sexually abused by a close family member. Her mother periodically woke Learned and her younger sister and two younger brothers in the middle of the night to flee landlords who wanted back rent. The children were bundled into the car and driven in darkness to a strange apartment in another town. Her mother worked nights and weekends as a bartender. Learned, the oldest, often had to run the home. Her younger sister, who was sexually abused by another member of the family, eventually committed suicide as an adult, something Learned also considered. As a teenager she had an abortion.

She was taking classes at Pacific Christian College several years later when she saw an anti-abortion film called The Silent Scream. “You see in this movie this baby backing up trying to get away from this suction tube,” she said. “And, its mouth is open and it is like this baby is screaming. I flipped out. It was at that moment that God just took this veil that I had over my eyes for the last eight years. I couldn’t breathe. I was hyperventilating. I ran outside. One of the girls followed me from Living Alternative. And she said, ‘Did you commit your life to Christ?’ And I said, ‘I did.’ And she said, ‘Did you ask for your forgiveness of sins?’ And I said, ‘I did.’ And she goes, ‘Does that mean all your sins, or does that mean some of them?’ And I said, ‘I guess it means all of them.’ So she said, ‘Basically, you are thinking God hasn’t forgiven you for your abortion because that is a worse sin than any of your other sins that you have done.'”

The film brought her into the fight to make abortion illegal. Her activism became atonement for her own abortion. She struggled with depression after she gave birth to her daughter Rachel. When she came home from the hospital she was unable to care for her infant. She thought she saw an 8-year-old boy standing next to her bed. It was, she is sure, the image of the son she had murdered.

“I started crying and asking God over and over again to forgive me,” she says. “I had murdered His child. I asked Him to forgive me over and over again. It was just incredible. I was possessed. On the fourth day I remember hearing God’s voice. ‘I have your baby, now get up!’ It was the most incredibly freeing and peaceful moment. I got up and I showered and I ate. I just knew it was God’s voice.”

In the United States we have turned our backs on the working class, with much of the worst assaults, such as NAFTA and welfare reform, pushed though during President Clinton’s Democratic administration. We stand passively and watch an equally pernicious assault on the middle class. Anything that can be put on software, from architecture to engineering to finance, will soon be handed to workers overseas who will be paid a third what their American counterparts receive and who will, like some 45 million Americans, have no access to health insurance or benefits.

There has been, along with the creation of an American oligarchy, a steady Weimarization of the American working class. The top one percent of American households have more wealth than the bottom 90 percent combined. This figure alone should terrify all who care about our democracy. As Plutarch reminded us “an imbalance between the rich and poor is the oldest and most fatal ailment of all republics.”

The stories believers such as Learned told me of their lives before they found Christ were heart breaking. These chronicles were about terrible pain, severe financial difficulties, struggles with addictions or childhood sexual or physical abuse, profound alienation and often thoughts about suicide. They were chronicles without hope. The real world, the world of facts and dispassionate intellectual inquiry, the world where all events, news and information were not filtered through this comforting ideological prism, the world where they were left out to dry, abandoned by a government hostage to corporations and willing to tolerate obscene corporate profits, betrayed them.

They hated this world. And they willingly walked out on this world for the mythical world offered by these radical preachers, a world of magic, a world where God had a divine plan for them and intervened on a daily basis to protect them and perform miracles in their lives. The rage many expressed to me towards those who challenge this belief system, to those of us who do not accept that everything in the world came into being during a single week 6,000 years ago because it says so in the Bible, was a rage born of fear, the fear of being plunged back into a reality-based world where these magical props would no longer exist, where they would once again be adrift, abandoned and alone.

The danger of this theology of despair is that it says that nothing in the world is worth saving. It rejoices in cataclysmic destruction. It welcomes the frightening advance of global warming, the spiraling wars and violence in the Middle East and the poverty and neglect that have blighted American urban and rural landscapes as encouraging signs that the end of the world is close at hand.

Believers, of course, clinging to this magical belief, which is a bizarre form of spiritual Darwinism, will be raptured upwards while the rest of us will be tormented with horrors by a warrior Christ and finally extinguished. This obsession with apocalyptic violence is an obsession with revenge. It is what the world, and we who still believe it is worth saving, deserve.

Those who lead the movement give their followers a moral license to direct this rage and yearning for violence against all those who refuse to submit to the movement, from liberals, to “secular humanists,” to “nominal Christians,” to intellectuals, to gays and lesbians, to Muslims. These radicals, from James Dobson to Pat Robertson, call for a theocratic state that will, if it comes to pass, bear within it many of the traits of classical fascism.

All radical movements need a crisis or a prolonged period of instability to achieve power. And we are not in a period of crisis now. But another catastrophic terrorist attack on American soil, a series of huge environmental disasters or an economic meltdown will hand to these radicals the opening they seek. Manipulating our fear and anxiety, promising to make us safe and secure, giving us the assurance that they can vanquish the forces that mean to do us harm, these radicals, many of whom have achieved powerful positions in the Executive and legislative branches of government, as well as the military, will ask us only to surrender our rights, to pass them the unlimited power they need to battle the forces of darkness.

They will have behind them tens of millions of angry, disenfranchised Americans longing for revenge and yearning for a mythical utopia, Americans who embraced a theology of despair because we offered them nothing else.

Chris Hedges, a graduate of Harvard Divinity School and former Pulitzer-prize winning foreign correspondent for The New York Times, is the author of American Fascists: The Christian Right and the War on America.