Will Universities in America Go the Way of the Big Car Companies?

naval academy

“At least the Naval Academy is free”

Fifty years ago, in the glorious age of three-martini lunches and all-smoking offices, America’s car companies were universally admired. Everybody wanted to know the secrets of their success. How did they churn out dazzling new models every year? How did they manage so many people so successfully (General Motors was then the biggest private-sector employer in the world)? And how did they keep their customers so happy?

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Older Members of Congress Perplexed by ATM Machines

man using atm

ATM machines perplex an aging congress

Sen. Tom Harkin (D-Iowa) has long pushed an amendment to limit those pesky and expensive transaction fees at automated teller machines, but his fellow senators didn’t go along with the idea this week.

One possible explanation: Quite a few of Harkin’s aging colleagues appear to have little or no contact with the decades-old technology of cash machines.


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New Credit Card and Overdraft Restrictions Cut Bank Fees by $5B


Credit card overhaul cuts bank fees.

New credit card and overdraft restrictions will save U.S. consumers from being charged at least $5 billion in fees this year alone at the largest U.S. retail banks and credit card companies, a USA Today analysis reveals.The analysis — based on institutions’ own estimates — comes during a year when new rules are kicking in to address unfair credit card rate increases and steep bank overdraft fees. It highlights the sizable dent these rules will have on an industry blamed for pushing consumers deeper into distress during the recession.


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Fees Add Up in the Bankruptcy Megacases Like Lehman’s


 Fees for the Lehman bankruptcy alone could easily touch the $1 billion mark.

More than $263,000 for photocopies in four months. Over $2,100 in limousine rides by one partner in one month. And $48 just to leave a message. Explanations for these charges? Priceless.

The lawyers, accountants and restructuring experts overseeing the remains of Lehman Brothers have already racked up more than $730 million in fees and expenses, with no end in sight. Anyone wondering why total fees doled out in the Lehman bankruptcy alone could easily touch the $1 billion mark merely has to look at the bills buried among the blizzard of court documents filed in the case.


Continue reading… “Fees Add Up in the Bankruptcy Megacases Like Lehman’s”


Federal Reserve Issues New Rules To Protect Consumers Against Gift Card Abuses

gift cards

Gift card rules take effect Aug. 22.

The Federal Reserve has issued new rules to protect Americans from getting stung by unexpected fees or restrictions on gift cards.  Gift cards have grown in popularity — with more than 95% of Americans having received or purchased them, the Fed said.


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How Will Credit Card Reform Affect Your Wallet?


How will credit card reform affect your wallet?

The new law makes it more difficult for credit card companies to charge higher-risk customers higher interest rates and fees. To make up the difference, issuers say, they need to raise the terms even for good borrowers.

Here is a breakdown of the reforms and how they might affect your wallet:


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Subprime Credit Card Issuer Raising Interest Rate To 79.9%


Apparently its open season on consumers

It’s no mistake. This credit card’s interest rate is 79.9%. The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It’s a strategy other subprime card issuers could start adopting to get around the new rules.

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Airfares Soar For The Holiday Traveler


Last year, procrastinators were rewarded when they finally got around to booking flights for holiday travel. Back then, airlines were not prepared for the sharp falloff in travel and offered last-minute deals to fill up empty planes.  This year? Dilly-dallying, even waiting just a few days, could carry a steep price. Fares, though still lower now than at this time last year, are rising each day, a trajectory that began more than a month ago.


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7-Eleven Launches Petition Drive Against Credit Card Fees – Collects 1.6M Signatures

7-11 petition drive 762

“We’re mad as hell and not going to take it anymore”

7-Eleven Inc. said Thursday that its franchisees and store operators have collected 1.6 million signatures nationwide in its petition drive against what it calls unfair credit card fees.
The Dallas-based convenience store chain held the signature drive from June 22 through Aug. 10 at store counters across the country. The petition calls for Congress to pass legislation that prohibits credit card networks and card-issuing banks from charging “unfair” transaction fees.
“Consumer response to this grassroots petition drive exceeded expectations,” said Joe DePinto, 7-Eleven’s president and CEO, in a prepared statement. “Customers share our frustration over the hidden fees that American retailers and, ultimately, consumers are forced to pay.”
The fees aren’t transparent and are assessed to store owners every time a customer uses a credit card, 7-Eleven said. The chain said fees cost American businesses and their customers $48 billion in 2008.
According to a 2008 study by the National Association of Convenience Stores, the average American convenience store owner paid 63 percent more in transaction fees than they earned in profits.
7-Eleven said convenience stores are unfairly hit because they generally have smaller purchases, which typically result in much higher rates.

7-Eleven Inc. said Thursday that its franchisees and store operators have collected 1.6 million signatures nationwide in its petition drive against what it calls unfair credit card fees.

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Fewer People Flying, But Fees Fatten Airline Revenue By $3.8 Billion


U.S. airlines are raking in more money this year from extra fees, although fewer people are flying.In the first six months of this year, the airlines collected $3.8 billion for checking bags, canceling or rebooking flights, carrying pets and assigning seats, the latest data from the Department of Transportation’s Bureau of Transportation Statistics show. That’s up from $2.3 billion for the first half of 2008.


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Banks Accused of ‘Criminal’ Overdraft Fees

overdraft fee 299

For years the people in congress have ignored the outrageous
practices of banks and credit card companies

A backlash is brewing on Capitol Hill against banks that charge large fees for overdrafts without asking or telling customers, the latest sign that the financial crisis is shifting the balance of power from banks toward borrowers.
Banks struggling to survive have become increasingly reliant on the fees, which could total $38.5 billion this year.
But congressional Democrats, who pushed through new restrictions on credit cards this spring, now are promising a crackdown on overdraft fees, using words like “criminal” and “rip-off” to describe the practice of letting people overspend and then charging them fees without warning. Most overdrafts are now incurred on debit card transactions.
Sen. Christopher J. Dodd (D-Conn.) plans to introduce legislation requiring banks to get permission from customers, rather than allowing overdrafts automatically. If customers decline and then try to overspend, the transaction would be rejected. A similar bill is pending in the House.
Dodd dismissed concerns about the impact on ailing banks.
“People out there are getting whacked,” he said. “They should have the right to say, ‘Deny me the transaction.’ “
Regulation overhaul
The attack on overdraft fees comes as Congress is considering a fundamental overhaul of financial regulation. The Obama administration has proposed the creation of a new agency empowered to write and enforce rules protecting consumers in financial transactions, removing that power from banking regulators. Dodd also favors the creation of a single agency to oversee the health of banks, consolidating a responsibility held by four agencies.
Even as that debate unfolds, however, some members of Congress see a need for more immediate action in specific areas, such as credit cards and overdraft fees. There is outrage that some banks have raised fees, squeezing consumers even as the government is investing vast sums to rescue the industry. Average overdraft fees at large banks have increased 4 percent this year, according to Moebs Services, a financial research firm.
Industry groups argue that customers are responsible for monitoring their account balances, that overdrafts should not happen unintentionally and that overdraft loans — the money advanced automatically to cover the overdraft — are a service that banks offer.
The issue has been simmering for years. In the age of handwritten checks, banks rarely made overdraft loans, but as the rise of debit cards vastly increased the volume of transactions, the industry gradually perfected a new strategy. Banks began to honor transactions, up to a preset limit, and then charge a fixed fee on top of the amount of the loan.
Most banks automatically offer the loans to all account holders, according to a study by the Federal Deposit Insurance Corp. released last year. They also do not notify customers when an overdraft is about to occur, nor do they offer them a chance to cancel the transaction. Furthermore, many banks process transactions in ways that increase the number of overdraft charges, for example by debiting large transactions before small ones, exhausting available funds more quickly.
Unregulated credit card?
Moebs Services projects that the industry will make $38.5 billion off the fees this year, up from $18 billion in 1999, in part because the average fee large banks charge for each overdraft has climbed by $10, to $35.
Because most overdrafts are now prompted by debit card transactions, consumer advocates argue that the industry in effect has created a new kind of unregulated credit card. But the Federal Reserve ruled in 2004 that banks were providing a service rather than a loan, and therefore the customer’s decision to spend the money was sufficient to indicate approval. The Fed did require banks to detail the fees on the customer’s next statement.
When Amanda Miller Littlejohn went to her bank to deposit money after returning from a Labor Day weekend trip to Nashville, she was surprised at how low her balance was.
Too embarrassed to cause a ruckus at the counter, she went home and checked her account summary online. She discovered that she had been charged five separate $36 fees for spending more than she had in her checking account.
“I had used the check card a couple of times, and they took it and no one said anything,” said Littlejohn, a 28-year-old Northwest Washington resident and owner of a public relations company.
When she called SunTrust to ask why money could not be pulled from her savings account, where she had thousands of dollars, the customer service representative said that she had never asked to link her accounts.
When she asked why the bank had lent her money if she had never asked for overdraft protection either, she said, she was told that the bank was protecting her.
Barry Koling, a spokesman for SunTrust, said that he could not comment on Littlejohn’s situation but that “we do offer a variety of products by which clients can avoid overdraft fees.”
A welcomed service?
A survey released by the American Bankers Association last month showed that 82 percent of 1,000 customers did not pay an overdraft fee in the previous 12 months. Of those who paid the overdraft fee, 96 percent said they were glad the payment was covered.
“Clearly, consumers who pay overdraft fees are the minority, and that number is shrinking,” Nessa Feddis, ABA senior federal counsel, said in a release for that study. “More importantly, most consumers want banks to pay their overdrafts so they can avoid the inconvenience, embarrassment and potential costs of having a payment or transaction rejected.”
An ABA spokesman declined on Friday to comment on Dodd’s upcoming bill because the details were not yet available.
The contours of the legislation remain undefined. The Federal Reserve has now proposed a new requirement that banks must sign up customers for overdraft programs. That is the minimum standard under consideration by Dodd’s staff.
The House bill, authored by Carolyn Maloney (D-N.Y.), would require banks to obtain permission from customers before each overdraft loan, but Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said he considered that idea unwieldy.
Sen. Charles E. Schumer (D-N.Y.) also favors a requirement making the fee proportional to the amount of the loan.
The fate of the bill is intertwined with the broader debate over financial reform. Frank said new rules clearly were necessary, but if Congress voted to create a new consumer protection agency, it could write the rules. If the banking industry succeeds in its opposition to the new agency, he said, he would favor a strong overdraft bill.
“Banks should understand that they can’t have it both ways,” Frank said. “If that should falter, then we will pass a tough overdraft bill.”

A backlash is brewing on Capitol Hill against banks that charge large fees for overdrafts without asking or telling customers, the latest sign that the financial crisis is shifting the balance of power from banks toward borrowers.

Continue reading… “Banks Accused of ‘Criminal’ Overdraft Fees”