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Are banks helping scam artists rip off their customers?
By Lauren | July 1, 2009
Today’s Wall Street Journal includes a fascinating article describing how banks are making it easier for con artists to steal from the elderly and infirm. According to the Journal, banks that automatically cover overdrafts make it easier for their more vulnerable customers to be ripped off by giving them more money for scammers to steal. The author, Karen Blumenthal, reported that one of her elderly relatives agreed to give power of attorney to his son when he began falling behind on his mortgage and other important bills. The son tried to control his father’s spending by whittling down the balance in his checking account. He soon discovered, however, that his father’s bank was routinely covering up to several hundred dollars of overdrafts each month then charging $33 for every overdraft, quickly building up another monthly mountain of debt. When the son contacted his father’s bank to complain, he was told that automatic overdraft protection was a standard customer courtesy and couldn’t be stopped. (The bank did eventually agree to turn it off.)
And that, folks, is how regulations are born.
The Obama Administration has proposed treating such automatic overdraft protection programs like credit lines, which would bring them under Truth in Lending disclosure requirements and could make it necessary for customers to opt into such programs instead of being automatically enrolled. If the Administration’s proposal is adopted, banks will undoubtedly grouse about being subjected to more red tape when their goal was simply to provide a convenience. (Of course, those hefty overdraft fees might have motivated them, too.) But if banks had thought through the probable consequences of offering automatic overdraft protection, they might have concluded that the risks outweighed the rewards.
Ultimately, of course, it’s the customer who’s responsible for managing his or her money, and banks shouldn’t have to monitor their customers’ spending habits. But banks and other businesses would be wise to treat Ms. Blumenthal’s story as a cautionary tale. If businesses fails to regulate their own conduct, sooner or latter the government will step in and do it for them.
To read the full Wall Street Journal article, go to http://online.wsj.com/article/SB10001424052970204556804574260062522686326.html.
Topics: Business Ethics, corporate responsibility, customer relations, ethics |
July 2nd, 2009 at 12:41 am
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