Report: Banks Guilty of Usury Via "Free" Checking Accounts

On Monday, the California Reinvestment Coalition said that the report " 'Free' Checking is not Free" demonstrates how banks are engaged in modern day usury that permits customers to spend money they don't have and then charge them excessive fees without their consent, such that the banks are ripping off their own customers who have "free" checking accounts with them.

In the report, CRC analyzed the overdraft policies of California's largest banks: Bank of America, Bank of the West, Citibank, Union Bank of California, U.S. Bank, Washington Mutual, and Wells Fargo.

The CRC asserts that all of the studied banks have complicated and often inexplicable policies regarding overdraft fees and the processing of their customers' deposits, thus making it very difficult for customers to avoid overdrawing their accounts. Customers are not given the choice to opt out of overdraft coverage, and thereby are forced to incur fees that range anywhere from $30 to $35. The banks thus fill their coffers by capitalizing on the unintentional overdrafting.

"Banks gain tremendous profits from overdraft fees at the expense of low wage workers," says CRC Executive Director Alan Fisher.

Customers are lured into debt traps by being allowed to use their debit/ATM cards even when there is no money in their account...a customer who thinks she has money in her account and uses her debit card to purchase a $1.35 bottle of water at Wal-Greens, could end up spending an additional $35 because her bank did not inform her that there is no money in the account," says CRC Senior Policy Advocate Rhea Serna.

Also angering consumer rights advocates against banks is the fact that fees can have interest charges attached to them as well. They point out that the definition of "usury" is "exorbitant interest rates", but banks routinely charge about 30% in annualized interest rates on credit cards-and practice that a couple of years ago was upheld by the Supreme Court.

Banks have also been accused of deliberately engineering the very conditions and behaviors that they allegedly despise and "must protect themselves against" by imposing fees for irresponsible behavior, trapping customers in vicious cycles of debt and raking in far more in fees and interest payments than they need to cover their "losses". One such alleged practice is the prolific offering of credit cards even to people who are known to have poor credit.

Apologists have opined that while giant banks such as those in the study probably don't desire to harm or do evil to their own customers, they create policies that look good to their managers but which follow the Law of Unintended Consequences and harm individuals because their sheer size makes it all too easy for them to become remote from and out of touch with their own clientele.

Consumer advocacy groups and financial professionals have long advised customers looking over bank account contracts more than once before signing on the bottom line.

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