Banks on Military Bases

In his article in a recent New York Times, Alex Berenson charges that "at least 1,000 banks are encouraging customers with low balances to overdraw their checking accounts, allowing the banks to skirt credit laws and collect billions of dollars in new fees." He reports that banks' consultants encourage them to seek low- to moderate-income consumers by opening branches in supermarkets patronized by those groups. The bankers argue that they are helping consumers avoid bounced-check fees to the retailers. Instead of paying these fees to retailers, the consumers are paying overdraft fees to the banks. Depending upon when the overdrafts are repaid, the cost of the service can run into hundreds and even thousands of percent. Bankers say that a percentage figure is misleading, since the fee is more like a late fee on credit cards.

According to Berenson, the banks "charge flat fees of up to $35 for each overdraft." Whereas it has been customary to allow overdrafts of $1,000 or more, the banks on military bases limit overdrafts to $100 to $300. After that, the bank allows the checks to bounce, and the customer must pay the retailer a bounced-check fee. The Office of the Comptroller of Currency and the Federal Reserve has warned banks about these practices.