Bureaucrats Are Moving To Cap Bank Overdraft Fees, Which Will Hurt the People It’s Meant To Help

Published

2 years ago

February 8, 2024

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Nobody likes paying fees. A fee, however, is a transparent way to reflect the price of something. And in a market economy, prices convey vital information that consumers and producers use to make good decisions. A rise in the price of apples tells producers that consumers want more apples. This prompts more apple production (and eventually, lower prices). And so when political interference keeps prices from fluctuating freely, the result is inefficiency and waste.

The Consumer Financial Protection Bureau (CFPB), calling the prices of bank overdraft protection “junk fees,” now proposes to interfere with these prices.

We’ve been down this road before. Last year, the CFPB proposed capping credit card late fees at $8 as part of President Joe Biden’s populist appeal to consumers who dislike this cost, which is obviously everyone. The problem, as I and many others explained at the time, is that late fees encourage timely payment, and their practical elimination leaves lenders unable to offset the risk of working with people who have lower credit.

The result will be fewer lines of credit available to those who need credit the most. But that’s a difficult outcome for most to see compared to the tangible benefit of lowering fees. Even consumers denied credit won’t know what or who to blame, so it’s no surprise that CFPB is expected to finalize the late fee rule any day now.

The next CFPB price control scheme would cap overdraft fees at levels as low as $3 per overdraft transaction. Commenting on this rule, Biden sounded perfectly populist: “For too long, some banks have charged exorbitant overdraft feessometimes $30 or morethat often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines.” He added, “Banks call it a serviceI call it exploitation.”

I get it. I remember the annoyance I felt when I was charged such fees. However, I reminded myself that it was the price to pay for not having one of my checks bounce or a debit card payment declined. It’s fair to wonder whether most of the people proposing these rules have ever had a checking account balance low enough to need the overdraft cushion.

In fact, overdraft protection is an optional, opt-in service that allows consumers to spend money they don’t have at the bank’s expense. Purchases are approved that would otherwise be declined for lack of funds. For low-income consumers, this service is sometimes vital. And indeed, consumers report by wide margins that they are glad it exists even though it naturally comes at a cost.

Thankfully for all of us, CFPB bureaucrats agree that banks should charge a fee. Unfortunately, they think they know best what these fees should be. They think they know the exact costs of honoring charges for customers with negative balances better than the banks do. And remember, because banking is competitive, any bank that charges excessive overdraft fees will lose customers to banks that don’t. That $30 fee per overdraft transaction is the price that emerged among the competitive forces that keep prices lower than they could be.

Because of bureaucratic interference, many who see overdraft protection as preferable to other short-term credit options, such as payday lending or high credit card balances, will have fewer choices as some banks decide that the service isn’t worth offering at the price deemed appropriate by government officials.

Banks might go even further. Given the slim profit margins they earn on small bank accounts, it’s possible that the loss of overdraft protection revenue results in some simply abandoning the very customersthe least well offwhom interventionists claim to be protecting.

This frequent political problemfailing to consider how policy interventions alter incentives in ways that produce bad outcomesextends well beyond the realm of finance. The United States education system, for instance, is collapsing in part because school boards across the country have decided that graduation rates were the most important metric to track success and are now frequently used to determine funding. So school administrators responded by boosting graduation rates in the simplest and most obvious manner: by making it all but impossible for students to fail. Students, in turn, have largely stopped trying. Graduation rates are up, but learning is down.

Politicians and bureaucrats appear not to be learning much, either. When planners make ham-fisted attempts to alter complex systems or intervene in markets, results rarely match their expectations.

Business

Second Horizon victim Janet Skinner ‘forced’ to sue Post Office as she seeks full redress for wrongful conviction

Published

2 hours ago

December 17, 2025

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Second Horizon victim Janet Skinner 'forced' to sue Post Office as she seeks full redress for wrongful conviction

A victim of the Post Office Horizon IT scandal is taking legal action against the government-owned organisation as she seeks full redress for her wrongful conviction.

Janet Skinner is believed to be only the second victim to sue the Post Office.

The former subpostmistress has been “forced” to take the state-owned business to court, her solicitor told Sky News.

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Ms Skinner has been a campaigner for victims of the faulty Horizon software for nearly two decades.

Around 1,000 people were wrongly prosecuted and convicted throughout the UK between 1999 and 2015 as a result of Horizon.

Despite having her conviction for false accounting overturned in 2021, Ms Skinner has yet to receive a final payment, has been given an insufficient interim sum and is being asked for six different expert reports, said lawyer Simon Goldberg.

Ms Skinner is taking legal action in an attempt to see the issue resolved.

“There’s no sign of resolution. We’re only forced to do it because enough is enough,” Mr Goldberg said.

“It’s cruel and traumatic beyond belief that she should still have to be fighting.”

Ms Skinner’s claim should have been settled within 12 months of the conviction being overturned, he said.

Mr Goldberg added the interim offers are not in keeping with the recommendations of retired High Court judge Sir Wyn Williams, who presided over the public inquiry into the scandal.

Both the Post Office and the Department for Business and Trade, which administers all but one of the victims’ redress schemes, said in October they would “always apply a generous approach” to assessing redress.

But Ms Skinner was initially offered a payment worth only 15% of her total claim.

“They’ve [claim assessors] clearly tried to grind her down and make her give up, and we’re not playing,” her solicitor said.

More legal action to come?

While Ms Skinner is believed to be only the second victim to launch a civil case against the Post Office, she may not be the last.

A postmaster made famous after being portrayed in the ITV drama Mr Bates vs the Post Office, Lee Castleton became the first to take such action in March.

“Unless there’s a sea change, there will definitely be more claims,” Mr Goldberg said.

Ms Skinner was given a nine-month custodial sentence in 2007 after the Horizon computer programme, made by Fujitsu, incorrectly generated a £59,000 shortfall.

She was imprisoned when her two children were in their teens, released with an ankle monitor tag, and sold her house when it was due to be repossessed.

Amid the ordeal, Ms Skinner suffered a neurological collapse and was left paralysed from the neck down. She has had to regain the ability to walk.

A Post Office spokesperson said: “We recognise the devastating impact of the Horizon IT Scandal on former postmasters like Ms Skinner and would like to unequivocally apologise for her experiences.

“Responsibility for Ms Skinner’s redress claim moved to the Department for Business and Trade in June 2025.

“We cannot comment on ongoing legal proceedings but once we receive the claim, we will engage fully in the process.”

Politics

UK to rejoin EU’s Erasmus student exchange scheme – reports

Published

2 hours ago

December 17, 2025

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UK to rejoin EU's Erasmus student exchange scheme - reports

The UK is to rejoin the European Union’s Erasmus student exchange scheme, according to reports.

The popular programme, which allowed Britons to spend a year studying at European universities as part of their degree without paying extra fees and vice versa for their European counterparts, ended for British students after Brexit on 1 January 2021.

But ministers could announce the UK will rejoin Erasmus from January 2027 as soon as Wednesday, The Times and The Guardian have reported.

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Sir Keir Starmer promised a post-Brexit reset deal with Brussels and announced the government was working on rejoining the programme in May.

Negotiations have included work on “mutually agreed financial terms” for the UK and the EU.

The UK had pushed for a discount on membership fees, which are calculated on the basis of a country’s gross domestic product (GDP), The Times reported.

It said the EU is understood to have offered the government a 30% reduction of fees in the first year of membership.

Labour MP Darren Frith told Sky News’ Politics Hub he would “welcome” such a move.

The Guardian reported that as well as university-based study exchanges, British students will be able to participate in vocational training placements under the scheme.

Cabinet Office minister Nick Thomas-Symonds held talks with Maros Sefcovic, the European Commission’s trade lead, in Brussels last week.

A Cabinet Office spokesman said: “We are not commenting on ongoing talks.”

But the UK’s universities welcomed the apparent breakthrough.

Tim Bradshaw, chief executive of the Russell Group of leading universities, said: “We’re delighted at the UK’s association to Erasmus+.

“With an even greater scope than previous programmes, Erasmus+ opens up fantastic opportunities for students, adult learners and young people to all benefit from new experiences and learning.

“It will also renew the huge contributions that EU students and staff make to life on our university campuses.”

The Lib Dems, who have been campaigning to rejoin Erasmus, welcomed the news.

Leader Sir Ed Davey said: “This is a moment of real opportunity and a clear step towards repairing the disastrous Conservative Brexit deal.”

US

Obamas planned to see Reiners the night they were killed, says ex-US first lady

Published

2 hours ago

December 17, 2025

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Obamas planned to see Reiners the night they were killed, says ex-US first lady

Michelle Obama says she and husband Barack Obama were due to see director Rob Reiner and his photographer wife Michele Reiner the night they were killed.

The former US first lady has paid tribute to the couple, who were found stabbed to death in their Los Angeles home on Sunday night.

The Reiners’ son, Nick, 32, was arrested and will be charged with two counts of first-degree murder in the killing of his parents.

Speaking on Jimmy Kimmel Live, Ms Obama said of the Hollywood couple: “We’ve known them for many, many years, and we were supposed to be seeing them that night.”

Rob Reiner was active in politics, supporting liberal causes.

Ms Obama’s comments came after Donald Trump suggested the 78-year-old died because of his anti-Trump views.

He referred to the director as “tortured and struggling” and said he and his 68-year-old wife had died “reportedly due to the anger he caused” by opposing the Republican president.

Reiners were ‘not deranged’

Ms Obama said: “Let me just say this, unlike some people, Rob and Michele Reiner are some of the most decent, courageous people you ever want to know.

“They are not deranged or crazed. What they have always been are passionate people in a time when there’s not a lot of courage going on.”

The former first lady highlighted how caring the couple were; stating they cared about their family, country and fairness and equality.

In a post on Truth Social, Mr Trump suggested the Reiners died “reportedly due to the anger he caused others through his massive, unyielding and incurable affliction with a mind crippling disease known as Trump derangement syndrome”.

“He was known to have driven people crazy by his raging obsession of President Donald J Trump, with his obvious paranoia reaching new heights as the Trump Administration surpassed all goals and expectations of greatness, and with the Golden Age of America upon us, perhaps like never before.”

Rob Reiner was known for directing some of the most-loved films of the 1980s and 1990s, including the rom-com When Harry Met Sally and the legal thriller A Few Good Men.

Tributes pour in

Former US presidents Joe Biden, Barack Obama and Bill Clinton as well as former US speaker Nancy Pelosi also paid tribute to the director.

Mr Obama added: “Beneath all of the stories he produced was a deep belief in the goodness of people – and a lifelong commitment to putting that belief into action.”

Among the other high-profile figures paying tribute was actress Jamie Lee Curtis, who played Reiner’s ex-wife in the hit comedy series New Girl. She said: “I will always remember them as they lived. Passionate. Political. Surrounded by family and friends.”

US actor Kevin Bacon, who starred in A Few Good Men, appeared emotional in a video he shared on Instagram, praising the director for giving him the role.

Bacon said: “The making of that movie was one of the best experiences that I’ve ever had on a set.

“It was a magical time. So, I’m just sending love to everybody that knew him, because I know that everyone’s hurting today.”

Reiner’s other films included The Princess Bride (1987), Ghosts Of Mississippi (1996) The Story Of Us (1999), The Magic Of Belle Isle (2012) and LBJ (2016).

Actress and activist Jane Fonda said she was “reeling with grief” in a post on Instagram, while Stephen King, whose books were adapted into Reiner’s 1986 Stand By Me and 1990’s Misery, said he was “horrified and saddened” by the death of the Reiners.