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SHARKS IN THE WATER: How US Commercial Banks are Eating America Alive
PART II: Ron's Story: One Computer Desk Helper's Banking Nightmare

By Cheryl Seal

See Part I at http://democrats.com/view.cfm?id=24052) Want to know just how much of a universal issue banking industry rip off practices are? Stand in any teller line at any bank and make some casual comment about overdraft fees or how you were overdrawn last week because the bank arbitrarily slapped a hold on the paycheck you have been depositing there for the past five years. You will soon have just about everyone in that line either nodding their heads in vigorous agreement of your tirade, or contributing their own horror stories. I know - I've tried this experiment several times in several widely differing settings. The response was always the same: Everyone KNOWS the system is out of control and probably should be illegal. But no one is sure what to do about it.

Thanks to a heartless and greedy Republican-controlled Congress that routinely rubberstamps nearly all of the banking industry's demands, the American banking system has become more ruthless than many bona fide loan sharks operating out of shadowy pawn shops or back alleys. And, just like loan sharks, the banking industry preys unrelentingly on the poorest, most desperate citizens. Not only does it prey on them, it makes SURE they remain fair game indefinitely through a system of stigmatization and endless, ever-growing debt. It is the same system that unscrupulous bosses used to use in the mining industry to reduce miners to owned men." When Tennessee Ernie Ford said "I owe my soul to the company store, that's just the sort of thing he was talking about.

The problem has gotten so huge, so multi-faceted, that it would take a book (which someone should have written years ago before things came to this sad pass) to lay it all out.

But here are some real, first hand accounts from victims of that school of circling sharks euphemistically known as American banks. Names and locations have been changed to protect my informants, but not the details of their banking experiences.

Ron's Story: Overdraft Nightmare: How a $31.00 fee Nearly Cost one Computer Geek his Life

Computer "geek" Ron had just turned 19 when he moved into his first apartment in Philadelphia. He had just landed a job as a computer desk helper and, thanks to having a roommate, was making just about enough money to pay his bills and have a few beers on Friday night. When he went to try to open up a checking account, he was a little surprised to discover he needed a credit check. At that time, of course, his credit was nonexistent, one way or the other. He received an ATM card and a brochure covered in fine print about bank policy. Being 19, Ron simply tossed the brochure aside after a quick glance.

Ron assumed that when he used the ATM card, it would only work when there was enough money in his account. If the money wasn't there, it would be declined. He never wrote checks, except once a month for bills. So he was dismayed to get the overdraft notice one week along with a $31 charge. Seems that the ATM card was no protection against overdrafts - a local drug store had swiped the card and shown it OK for a $6.00 purchase of soda and potato chips. So now Ron was overdrawn a total of $36.00 (he'd had about a buck left in his account when the purchase was charged). To put one overdraft banking charge in perspective for the tens of millions of Americans who, like Ron, work in the service sector, think of it this way: That one overdraft fee represented FOUR HOURS of work for Ron, who made just over $7.00 per hour.

Ron never recovered from that one $31.00 hit. As it turned out, the day after the ATM purchase (and before learning of the overdraft), Ron had deposited part of his paycheck and written a check for his cell phone bill. Thanks to the $31 fee, his account was $2.00 short when the check to the cell phone company came in. Another $31.00 fee. Now Ron had lost the equivalent of a full day's pay. He couldn't afford to put his next paycheck in and lose $62.00 from it because he owed his rent for the month. So Ron was forced to go to a Check Cashing operation to cash his check. These places take 2-10% off the top of any check they cash, so Ron lost even more money - about $8.00. He was now down $70.00, which was what he owed his roommate on the power bill.

Most of the people in Congress handing out goodies to the banking industry probably don't know what a "Check Cashing Place" is. No one in America knew what a Check Cashing Place was until after the Reagan era when banks were allowed to start practicing usury unchecked. These are places that cater to the working poor who cannot afford to have bank accounts. They cannot afford to have bank accounts because, like Ron, they cannot afford the fees and/or cannot pass a credit check. Now, you can't even open a savings account without a credit check! Unbelievable. So now many of the working poor not only have to try to make a low-wage paycheck stretch, they must give part of each check to a Check Cashing Place.

Ron's plight worsened when the cell phone company tried to put the check through again, and again it bounced. Another $31.00 to the bank and now an additional $25.00 to the cell phone company to cover its returned check fee. No Ron was down $126.00 - Nearly half a week's pay!

Ron tried to talk to the bank manager and have some of the fees forgiven. But the bank manager was unsympathetic and acted as though Ron had done something not quite nice simply for being overdrawn. What about the ATM allowing a purchase on no funds? Well, that's too bad - he should have known he didn't have enough money. But Ron, like probably half of ALL Americans of all ages, was not a very good accountant. His only real fault: not having more money. If Ron had been wealthier, with a big buffer of several hundred dollars at the bottom of his account, he could make errors in accounting left and right and never pay a price for them. He'd probably never even know! In fact, the bank would have rewarded him with free checking. He would be able to afford to open an overdraft protection account now offered by banks - offered ONLY to those with enough money to put into such an account AND good credit.

Welcome to the new America, where the rich get richer and the poor get poorer - and stay poorer - to make sure the rich stay rich.

So Ron was forced to leave the debt at the bank and watch as his checking account was, after a time closed. Every week, he had to go to the Check Cashing place, which was not in a very good part of town. One Friday evening, he got out of work late - after dark. He went to the Check Cashing Place on his skateboard, took his $300.00 or so dollars in cash, and headed home. As he crossed an empty parking lot, a man stepped out in front of him and pulled a gun. Unknown to Ron, the Check Cashing places are carefully watched Friday nights by a third level of predators: muggers. Someone had figured out Ron took his pay in cash and what his route home was.

Ron luckily, got away uninjured - but not before having to hand over his entire paycheck to the mugger. So now Ron was down over $425.00. He could not pay his rent or buy food. His mother, a single parent who didn't make much money herself, could only help him with food. In short, Ron never recovered from that first $31.00 hit. After a few months of pushing his bills ahead, he lost his cell phone, and then his apartment and had to move home. Ron was lucky in this respect - there are many working poor who, faced with the same situation, end up on the street, sleeping on park benches or in shelters. In fact, the banking industry is directly responsible in part for the rise of an entirely new class of poor: the working homeless.

Think Ron's banking troubles ended with his "crash." Nope. About a year later, back on his feet again with a better job, Ron tried to open another checking account, only to discover that the banks now have a "blackballing system." If you haven't paid ALL the fees on a past account - even if that account has been closed for years - you cannot open another account anywhere else, even if you disputed the charges. And, to top it off, the fees and closed accounts are a black mark on your banking record: in short, you become one of the growing millions of stigmatized working poor. This stigma enables the banks to make even MORE money off you. Try to get a credit card and you will find yourself locked into the "23-25% interest club." Try getting a car loan - the same thing.

What Ron's story illustrates most clearly, however, is that the banking system is causing the working poor to bleed in more ways than one. Ron was lucky that the mugger didn't harm him. Countless others have not been so lucky. Ron said that while at the check cashing place, he saw many elderly people cashing checks because they, too, no longer had savings or checking accounts. How many thousands across the nation have been injured or killed trying to make their way home from check cashing places which, unlike banks, do not have the luxury of security guards?

More recently, a new variation on the Check Cashing place theme has emerged: the "loans against paychecks" business. These places will loan you the full amount of your paycheck in advance - for interest rates of up to 33%. Some working poor will get snagged in this trap when faced with what looks like worse alternatives - eviction, for example. To meet a rent deadline, a worker will take the advance, only to find that they can never make back up the 33% difference and so become ensnared in what, though legal, amounts to a Mafia-style loan sharking racket. The only difference is, you can't opt to have your legs broken and call it even.