Pew research tells us that the way many banks deal with their customers with respect to overdrafts is at best unfriendly and at worst toxic. Their answer (of course, sigh…) is more regulation:
"The results of our research overwhelmingly show the need for new rules to govern overdrafts. Since prepaid cards are relatively new to the market and overdrafts are rarely offered, we urge the CFPB to ban this feature when it proposes rules for general purpose reloadable prepaid cards this summer. Overdraft practices are more entrenched in checking accounts, so we propose that the CFPB prohibit reordering of transactions that maximizes overdraft fees—and require that these fees be proportional to a bank’s costs to provide the loan." http://www.americanbanker.com/bankthink/consumer-overdraft-concerns-highlight-need-for-reform-1068409-1.html
Always more regulation.
But what about more competition? Why does no one seem to see that this enormous thicket of complex regulations that has metastasized in Washington DC and other capitals is perhaps a key factor in these evil outcomes for consumers? By protecting incumbents from new entrants, new business models, giving them freedom to shoot their proverbial customers in their government-protected barrel with impunity knowing that their customers have no place else to go, over-regulation just creates a culture of poacher and gamekeeper that ignores the customer.
Is it ridiculous to think that in a world where it was easy for entrepreneurs to create and build new current account products and services, that no one would think to build a business that wasn’t premised on tricking and screwing over their customers? (Oh wait, isn’t that what Simple, Moven and others are doing? Yes, but there should be dozens of these and they are considerably slowed down by a regulatory landscape that treats them with the same aggressive suspicion as it does the cynical incumbents it helped create.)
If Starbucks served crappy coffee in a dump, customers would go to the coffee house next door that served great coffee with a smile. The knee jerk reaction wouldn’t be to say we need rules to prevent Starbucks from selling bad coffee in ugly stores. And consumers would have a choice because Starbucks isn’t protected by a thicket of regulations that only they can afford to navigate.
I just wish regulators would stop trying to micro-manage everything and create variable speed regulations - if you are small and your business model is intrinsically consumer friendly, recognize this; if you are big and a convicted business model thug, the regulatory rope should much shorter…