Photo: Flickr / pushthisbutton
Hardly anyone pays with a check these days, but that hasn’t stopped big banks from gouging people who bounce them.Banks may mark up processing charges by as much as 470,000 per cent, according to author David Cay Johnson, who discusses various forms of price gouging in his new book, The Fine Print: How Big Companies Use “Plain English” To Rob You Blind:
“Back in the late 1970s, when checks were still processed by a person and a machine rather than digitally, Crocker Bank (now part of Wells Fargo) was forced to reveal in a California court case that its cost was 30 cents. At that time, the bank was charging customers $6 for bounced checks, a markup of 2,000 per cent. The California Supreme Court held that charging 20 times the cost was not necessarily unconscionable. Adjusted for inflation, that $6 fee would now be $21, less than half was BofA charges.
“What are today’s costs for processing a bounced check? BofA won’t tell customers, but research papers on costs in the digital era suggest it could be less than a penny, making the markup by BofA in the neighbourhood of 470,000 per cent.”
You can thank the government for bank-friendly legislation that lets this happen. As Bankrate’s reported, the trend will only continue as other bank fees shoot up.