by Jack Lee
A college student writes, “Dear Mr. Lee, is it legal to charge $20 a week on a balance of $234? I’m a second year student at CSUC and I messed up on my automatic bill pay due to an illness and then layoff at my pizza place job. The bank covered my overdrafts, but imposed a heavy penalty per payment – which is fair I guess, I did it. I didn’t stop
those automatic payments in time and got caught short. But, as soon as it happened I called the bank and told them I’m trying to dig my way out of the hole and could they stop the $20 weekly penalty they are currently charging me? They wouldn’t budge, no payment schedule, nothing, just pay up. In one year that charge would be equal to well over five times my outstanding balance! Can they really do that?”
Dear College girl, I checked with a friend who manages a bank in Chico and he said he didn’t know about US Bank’s charges, but at his bank and for banks in general, the rules are changing Feb. 22 and this will affect how much banks can charge you for certain penalties or fees. He said the penalties will likely all be going down. As for your current charges – tough luck.
An example of the change coming our way: When they plan to increase your rate or other fees. Your credit card company must send you a notice 45 days before they can increase your interest rate; change certain fees (such as annual fees, cash advance fees, and late fees) that apply to your account; or make other significant changes to the terms of your card.
Anyway, back to the original question, it appears from research they can indeed charge the $20 penalty each week there is an outstanding balance in the overdraft protection plan. US Bank will probably lose a few customers over this, but those customers they didn’t want anyway.
My opinion is, you would have been better off to borrow from the shady character in the black rain coat than to get stuck with US Bank’s weekly charge, That is outrageous and I feel bad for you, they should be ashamed, but it’s legal. This is not an interest rate – it is a penalty fee for carrying a negative balance and it is in your overdraft protection contract.
Question of the day: Can big banks ever be ashamed? I think not. But, a Class Action lawsuits make em hurt.