Why I Support Reg E
Reg E required that banks separately and explicitly get customer permission for debit card and ATM overdrafts. This reduced the profitability of retail checking accounts by reducing NSF income to banks, making many checking accounts unprofitable. I discussed this in the Celent report, Reg, Reg Go Away: Sorry Banks, They’re Here to Stay, April 2010
I am in favor of Reg E, and actually believe it is good for the banking industry in the long run, even though as Maynard Keynes stated, “In the long run, we’re all dead.” I think transparency is a good thing for the long-term relationship between a bank and its customers. Clients who now opt in to overdraft know they did it, and are likely to pay the fees without rancor.
Reg E isn’t new. Why discuss this now? I recently stayed at an Embassy Suites and saw the following message on my water bottle:
It’s In Your Hands.
You’d think that Embassy Suites was into preserving the environment and encouraging recycling, but unlike many hotel rooms I stay in, there were no recycle bins in the room. So why the strong messaging?
If you look in the upper right hand corner of the label, in low contrast knock out type, you can see $4.95*. And if you attempt to read the fine print at the bottom of that label, you see (or don’t stand a chance of seeing) that if you drink this water $4.95 will be added to your room charge. While the recycling of the bottle might have been in my hands, I want to give Embassy Suites just a finger.
This is exactly what banks are doing when they bury overdraft protection language in paragraph 23 of an account agreement and surprise their clients with a $33 overdraft charge. What do you create? Angry and disloyal customers. Is that any way to run a hotel? Is that any way to run a bank?