Monday, December 14, 2009

Irresponsibility, The Way of the Future

Blogger Bungalow Bill posted an excellent piece this morning about school administrators in Bloomfield Missouri's Middle School eliminating homework. It seems that the administrators, the parents and the students have all abandoned the concepts of being responsible and have decided to do the easy thing, rather than doing the right thing.

See: Missouri's Bloomfield Middle School Goes to No Homework Policy

After reading his post, I felt a strong need to write about another example of irresponsible behavior that our government is going to be rewarding.

It seems that the Federal Reserve is issuing new rules. And that certain congressmen are trying to pass new legislation that will establish greater government control over and limits upon the number, and dollar amounts, of fees that banks can apply to accounts of account holders who choose to spend more than they actually have in those accounts.

Now please do not get me wrong. I am not defending every practice of the banking systen in this country. But this is a not a matter of unfair bank policy. It is a matter the government protecting and thus rewarding the irresponsible behavior of some account holders, which is going to result in responible account holders paying more and higher fees.

So I have to ask... How is it going to make our banks any more stable, or our economy any healthier, if the government takes away, or at least severely limiting, the just and due penalty that banks can apply to the accounts of account holders who knowingly and willfully do not keep their spending to within the limits of their income?

I was taught, by my parent that spending more than I made would lead to financial ruin. The pastor of a church I attended, in a town I used to lived in, put it this way:

If your out-go is greater than your income, then your upkeep will be your downfall”.

So to me it makes no sense to reward irresponsible behavior by protecting it. Common sense dictates that doing so can only, and will only, lead to more irresponsible behavior. Unfortunately, that appear to be the trend under the messiah of the irresponsible currently taking up space in the White House. And it does coincide with the kind of example that some in the government seem to want to set for everyone.

The “problem” that the congress and the Fed say they are trying to “correct” stems from the fact that there are people who do not want to abide by the terms and conditions, that they agreed to, when they opened their accounts. For some unfathomable reason these people have decided that they should not be expected to monitor their own spending habits. They do not understand why they should be held accountable for their irresponsible behavior.

These whiners generally do not want to have to take even the simple step of recording their spending in the registry provided to them with their checks. Nor do they want to use any other kind of personal record keeping technique. In their view, the task of keeping track of their spending and thus preventing any overdrafts should fall entirely onto the bank, instead of onto the account holder. They feel that they should be able to call the bank, or look at their account online, and see exactly how much money they actually have available to spend at any given moment in time. And for some, even doing this is more than they feel they should be expected to do.

Now I know that we live in a near paperless era. And I understand that most financial transactions are accomplished electronically now-a-days. But that does not mean that any bank can instantaneously track all of an account holders spending. The fact is that many transactions are not transmitted to the bank at the time that they occur. Retailers and service providers often do not send the days receipts to their own bank until the end of the day. Others only do so only once a week. It is also possible for a particular transaction to get lost in the shuffle for a time. When this happens, the provider may not present that transaction to the bank for months. This delay does not and should negate the legitimacy of the transaction.

And let’s not forget that when checks are used, especially when they are sent through the mail, the bank has no way of knowing the amount of the check, let alone that the check has been written. At least not until the recipient of that check submits it. Any delay between the writing of a check, and time that it arives at the bank that it is drawn on, is not the banks fault, nor does it negate the legitimacy of the check.

So the simple fact is that it is impossible for any bank to be able to precisely know, at any given moment in time, the exact number of transactions an account holder has initiated, or the dollar amounts of transactions that it has not yet received. And since it is impossible for a bank know, with certainty, how much money an account holder has spent, in one form or another, it is also impossible for that bank to tell that account holder exactly how much money they actually have available to cover further spending.

There also seems to be some anger about the how banks organize the day’s transactions and calculate the new balance for a customers account. Generally the bank will begin by adding in any deposits or other credits due to that account, And that is as it should be. They then subtract any withdraws or other debits from the account. Most banks do not subtract the transactions in the order in which they occurred on that day. Instead, banks generally start by subtracting the largest debits first and continue down the list of debits, entering the smallest of them last.

The complaint is that this procedure insures that the largest number of overdraft fees, if any, will be applicable to the account. And sometimes it does. But it also means that the largest debits, which are typically the most important ones (I.E. mortgage, and/or car payments), are less likely to overdraw the account, and more likely to be paid out, thus not causing the account holder additional difficulties with, or fees from, a mortgage holder, loan provider, etc..

So here is the crux of the matter. Those people who are whining about getting too many overdraft fees need to stop being so irresponsible. They need to stop expecting someone else to monitor their spending habits for them. They need to grow up and learn to do what a responsible adult would do. They need to keep their own records and get their spending habits under control. They need to stop relying upon electronic resources, like online banking and customer service phone lines, to tell them how much money they have available to spend.

These resources are not going to protect the irresponsible account holder from his or her own foolishness. They are simply an aid, a reference tool if you will, to help confirm that a transaction has, or has not arrived to, and been recorded by, the bank. When one of these electronic resource says that there is such and such an amount of money in an account, that amount excludes any and all transactions that have not yet arrived at the account holders bank. The account holder alone is responsible to realize this fact and take it into account when deciding what they can and should spend. The account holder must realize and accept the fact, that once a transaction has been initiated, once a check has been written and submitted as payment, the funds represented by that transaction or check are no longer available to cover additional spending. This is true regardless of whether or not the bank has received and recorded that transaction or check.

I have to wonder why is it that the government always seem to want to protect the most foolish and irresponsible people amonst us? Do our elected office holders and appointed bureaucrats not realize that by doing so, they only guarantee that there will be even more foolish and irresponsible people, doing even more foolish and irresponsible thing? Do they not understand that as a consequence, there will be more need for more regulations to protect those people And that those people will become even more dependent upon the government to watch over them, and take care of them, and make decisions for them, and...

Wait a minute. I think I may have just answered my own question?

In closing, it must pointed out that banks will need to replace the moneys that they can no longer collect, as a result of these new laws and regulations, from irresponsible account holders. This will probably be done by charging new or increased fees on other bank services. And these new and increased fees will, of course, be paid by those of us who have chosen to be responsible account holders, and who actually do abide by the terms and conditions that we agreed to when we opened our accounts.

Related Links:

* Democrats to lift debt ceiling by $1.8 trillion, fear 2010 backlash

* Fed takes aim at overdraft penalties

* Board of Governors of the Federal Reserve System,
** Press Release: November 12, 2009

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  1. GREAT PIECE!!! (caps for effect only -heh) This is EXACTLY what is happening. How can anyone with a sane outlook on the future see CONTINUING in the same direction time and time again (raising the debt ceiling) as any kind of "correction"??? If we're in a skid, are we gonna just continue turning the wheel to support it?? Sure would be a lot of doughnuts being cut, not to mention the number of auto accidents we'd see ... but then, we're already in a train wreck now! At least for us, there's a track, of sorts. :)

    PS - I thought I was following Bill and I see I'm not. I'll correct this asap!

    Thanks again for a great piece and God bless!

  2. I don't want to sound like I am irresponsible, but I had a situation where my debit card was used without my permission. As soon as I discovered the problem, I called Regions Bank. It still didn't stop them from tacking on nearly $300 in overdraft fees, which I wound up paying nearly half of. Banks have become way to aggressive with the overdraft fees, and they often take the largest charge so the five little charges amount to five fees over one fee. While I agree some of this is personal responsibility, sometimes it's out of the hand of the consumer, and the banks do little to help. I know I won't be banking at Regions and paying their $39 fees anymore.

  3. Greeting BB,
    As I said in my post, I am not defending every practice of the banking system in this country.

    I am sorry to hear that you had to deal with the kind of problem you described, which I do not believe fits into the type of situations I was writing about. My post was about account holders who clearly demonstrate a pattern of irresponsible behavior. Quite simply these people regularly spend more than they have in their accounts, and then whine about being penalized for it.

    Now sometimes an overdraft is due to a mistake made by the account holder. People do make mistakes. I know I have. Sometimes it is caused by an unexpected emergency expenditure. In these cases, most of the banks that I have had dealings with have been at least somewhat forgiving. From my discussions with other people, I have learned that some banks are in fact very forgiving in these kinds of circumstances. But the fact is that no bank is, or even should be, expected or required to return fees that are not a result of bank error or criminal activity by a person or persons other than the account holder.

    I am assuming that in your case, your card, or card information, was actually stolen and then used by the thief. That being the case, and since you reported it to your bank right away, then it only seems right that your bank should have immediately canceled the stolen card, issued you a new card and removed all of the overdraft fees associated with the illegal use of the stolen card. I can therefore fully relate to your displeasure with how your particular bank responded to your situation. Had I experienced a similar set of circumstances, I too would have changed banks.

    Now I have been told about cases in which an account holder has, for one reason or another, allowed a trusted friend or family member to use his or her card for a particular purchase. They then find out that the friend or family member was not as trustworthy as was believed. Now you have entered a gray area. Although any additional use of the card might not have been specifically authorized by the account holder, it was in fact the account holder that opened the account to this unauthorized use in the first place.

    By allowing someone else access to his or her card and pin number, the account holder has in effect opened the door for that person to use it again and again. As far as the bank is concerned (I’m going to play devils advocate here), the account holder alone is responsible for any and all activity by any person or persons that the account holder has given access to the card or card information and pin number.

    If the account holder is willing to press criminal charges against the “unauthorized” user of the card, the bank might be willing to treat the event as if the card were physically stolen. But that would be entirely up to the bank, and it would be done as a courtesy, and not as an obligation on the part of the bank.

    The unfortunate truth is that the loudest whiners about overdraft fees are not people who have received them due to bank error, their own mistakes, emergency expenditures or even gray areas. They are people who have demonstrated a pattern of irresponsible behavior. My post was about these people. The kind of individuals who either refuse to take the simple step of keeping a record of their own spending so that they know how much they can or cannot spend, or who feel entitled to spend more than they have (you know, the obamanites), and/or are angry that they keep getting caught trying to play the system, also known as kiting.


Keep it clean. If all you can do is call names or threaten retribution, It will be assumed by most readers that you are admitting that you have nothing intelligent or worth while to add to the conversation, and therefore are not worthy of paying attention too.