Overdraft Practices of Financial Institutions on Military Bases
Much is being written about financial consumer rights in general and “predatory lending” practices by certain financial institutions aimed at military personnel and their families in particular. Most notable is the 2005 Military Lending Act that succeeded in outlawing payday lending to military personnel and their families near military bases. This legislation came about as a result of very strong and active support from DoD because of their concerns about the negative impact of payday lending on troop readiness.
We at the Armed Services YMCA (ASYMCA) are concerned with the total well-being of military personnel and their families. As we all know, financial literacy and good financial management are essential elements for our constituents to effectively negotiate the rigors of deployment and the unique challenges military life can bring. It is no secret that financial disruptions and ineffective money management are often at the core of family distress. While we recognize that financial management is above everything else a personal responsibility, we also recognize that unfortunately there are in fact financial institutions on military bases that have exorbitant fee policies that are not in the best interest of military personnel and their families.
One such fee policy is overdraft charges more commonly referred to as “bounced check or NSF fees.” Overdraft abuses related to debit card purchases and ATM withdrawals are particularly harmful for at least two reasons; first, overdraft fees triggered by these transactions, which could easily be denied at the terminal, often take consumers completely by surprise. Second, an overdraft fee charged on a typical debit card purchase is vastly disproportionate to the amount of the overdraft itself. The Federal Deposit Insurance Corporation released a survey in January 2008 that broke down the average cost of overdraft fees to consumers and found that a typical $27 overdraft repaid in two weeks incurred an APR of 3,520 percent. Imagine the impact on a military mom buying a box of diapers or a cup of coffee without knowing her balance…
Overdraft charges represent one of the biggest slices of the short-term unsecured credit market. It is bigger than credit card over-the-limit penalties, and much bigger than payday loans, bringing in $34.7 billion in revenue for banks and credit unions in 2008, compared with $7.3 billion for payday lenders. We at ASYMCA are neither “anti-bank” nor “pro-consumer.” We take what we consider to be a reasoned and measured approach that calls upon both parties to be responsible and accountable. In that regard, we are calling on both base commanders AND military families to become aware of and educated about potentially egregious on-base overdraft policies and call for their end. Below is a list of questions and responses that are relevant for open and honest dialogue.
What do you consider to be industry “best practices” as they relate to overdraft fees, and on what do you base that belief?
Desired policy: In February 2005 the OCC, Federal Reserve, FDIC and NCUA issued a definitive guidance entitled, Joint Guidance on Overdraft Protection Programs that outlines clearly and definitively standards for determining deceptive practices by banks relative to overdraft programs.
Does the institution offer a lower-cost form of overdraft coverage, such as a line of credit at a reasonable interest rate? Does it present this option to customers before offering to enroll them in fee-based overdraft coverage and enroll everyone who qualifies for it in this lower cost option?
Desired policy: Yes. Institutions should offer lower-cost forms of overdraft protection and enroll everyone who qualifies for it in this lower cost option and ensure that customers are educated about the product.
Does the institution charge overdraft fees on debit card and ATM transactions?
Desired policy: No. These transactions should simply be denied at the point-of-sale for no charge.
Does the institution clear debit transactions in order from highest to lowest, which maximizes overdraft fees?
Desired policy: No. Institutions should clear transactions in real-time or in order from lowest to highest so that overdraft fees are not maximized.
Does the institution limit the number of overdraft fees a customer can incur in a given period?
Desired policy: Yes. Institutions should limit the annual number of times overdraft fees are charged per customer to six. At that point, institutions could continue covering overdrafts but only if they enroll the customer in a lower cost form of coverage like an overdraft line of credit. If they do not qualify for a line of credit, overdrafts should simply be denied.
What percent of the institution’s total revenue is derived from fees charged to customers, as opposed to revenue earned via the customary deposits and lending business of banking institutions?
Desired Policy: Any dependence on fees that exceeds 10% of total revenue highlights a serious problem, and the institution should know that its customers are keenly aware of what is, and what is not, a healthy business model. Many of the banking institutions now servicing our military and their families depend on the fees component of total revenue up over 70%, even 80%.
Read the Summer Newsletter
Catch up on the latest news and events happening at ASYMCA! Hear from our Chairman of the Board, see pictures from the last few months, and learn about the new and exciting things going on at our branches around the country. Read Spring/Summer 2010 Newsletter. Visit the Newsletter Archive for past editions.
Soldier’s Closet – Okla. YMCA Clothing Drive
YMCAs across Oklahoma are enlisting the support of their communities in a statewide clothing drive for the Armed Services YMCA (ASYMCA) in Lawton. Clothes donated at any Y location in the state from June 21 through July 18 will go to the Soldier’s Closet, a free store open to junior enlisted military families at Fort Sill.
The Soldier’s Closet served more than 2,500 Fort Sill soldier families last year. The army post is expected to process and deploy a record number of troops this year, according to Bill Vaughn, executive director of the ASYMCA in Lawton. The most requested items at the Soldier’s Closet are baby clothes and formal dresses.
“We have had a baby boom at Fort Sill and can’t keep baby items in supply,” Vaughn said. “Ball gowns are also in high demand. Our young soldiers are invited to several balls a year and formal dresses are expensive for young couples to purchase, so they turn to the Soldier’s Closet.”
Clothing donations can be dropped off at any Y location across the state during regular business hours. Visit www.ymca.net for a complete listing of all Oklahoma Y locations. For more information on the Soldier’s Closet or the Armed Services YMCA at Fort Sill, contact Bill Vaughn at (580) 355-5520.
Medal of Honor Recipients Launch PTS PSAs
At a time when suicides among Service members continue to rise, America’s Medal of Honor recipients are launching a public service campaign urging today’s military to seek help for post-traumatic stress (PTS).
The campaign, called “Medal of Honor—Speak Out!,” features nearly 30 video testimonials by recipients who survived the most harrowing experiences in battle, including severe physical wounds as well as emotional trauma. Their message—available at www.MedalOfHonorSpeakOut.org—is simple: Don’t let the enemy defeat you at home—make use of the resources available today for combat stress.
The “Medal of Honor—Speak Out!” website provides downloadable videos from the Medal of Honor recipients, a two-minute montage and branch-specific montages urging Service members to seek assistance for combat stress issues that may have become problematic in their lives. The public, military leadership, and news organizations are invited to download and share these resources with Service members and their families.
This is the first time a group of the 91 living Medal of Honor recipients have participated in a public service campaign that aims to encourage today’s Service members to stay both physically mentally strong and reduce the tragic number of military suicides.
“Each of America’s Medal of Honor recipients has seen the ugliest side of war,” said retired Air Force Colonel Leo Thorsness, a former Vietnam prisoner of war and president of the Congressional Medal of Honor Society. “Yet, when we returned home from Vietnam, Korea and WWII, the military had few tools to help. Today’s Service members have access to numerous online resources and crisis hotlines, which we hope they’ll use.”
Despite all of these resources to fight PTS, 65 percent of Service members say they fear being “seen as weak” for seeking help and half fear it will hurt their military career.
“Central to providing behavioral health care in the military is ending the stigma that a person is weak if they seek counseling when needed,” said David J. McIntyre, Jr., Congressional Medal of Honor Foundation board member. “Medal of Honor recipients know first-hand what today’s Service members need—the reassurance that it is OK to seek help.”
The campaign launches Saturday, May 15—Armed Forces Day. Established in 1949, the day was the result of a consolidation of the military services in the Department of Defense. It was intended to replace the various Army, Navy, Air Force, Marine Corps and Coast Guard Days. However, observance of these days, especially within each particular service, still continues to this day.
ASYMCA partners with HBO’s ‘The Pacific’
ASYMCA is proud to be working with HBO on The Pacific video tribute campaign and invites you to thank our veterans and active military by recording a personal message with the HBO Pacific Video Tribute Widget below. The Pacific, a 10-part miniseries event, airs Sundays at 9PM, only on HBO.
Local photographer shoots Art & Essay exhibit at BWI
As part of his “Airport Art” project featuring art at Baltimore/Washington International (BWI) Thurgood Marshall Airport, Washington, D.C., freelance photographer Elvert Xavier Barnes took these photos of the ASYMCA Student Art & Essay Contest on display in the International Concourse.
Operation Outdoors
In 2007, More than 3,000 service members and their families attended camp free of charge, thanks to a $400,000 grant from the California Community Foundation’s Iraq-Afghanistan Deployment Impact Fund.In 2008, the Sierra Club donated $1.5 million to be used over the next three years in support of a resident camping experience for military children.
Click here for more information.
Student Art & Essay Contest
The annual ASYMCA Art and Essay Contest is officially launched every November and is open to all eligible children of U.S. active duty or retired service members. Winners are chosen the following Spring.
Winners of both the art and essay contests have their winning entries displayed in a number of locations in the Washington, D.C., area, including in the Russell Rotunda, and are recognized at an annual luncheon on Capitol Hill. ASYMCA awards U.S. Savings bonds totaling $7,600 to 1st and 2nd place winners of both contests, as well as honorable mention recipients of the essay contest.
