Improper Bank/Credit Card Fees

It used to be that banks made their money by holding your deposits and investing them. Their investment earnings were theirs to keep. Since the amount of your deposit was guaranteed, there was no risk to you. It was a win-win situation.

They also made money by lending you money at one interest rate, and borrowing it from another bank or the Fed for a lower rate. Their money came “on the spread,” the difference between the two rates. If you looked for the best rate you could find before taking a loan, this didn’t hurt you much either, because you had to pay interest to someone to get a loan.

Then banks discovered fees. Fees for checks, fees for checking accounts, fees for credit lines, etc. Even this was OK; most of the fees were disclosed, and most of them could be avoided by carefully managing your account.

Then banks started issuing credit cards, and the real bonanza began. Credit card issuers started charging pretty much every type of fee you can imagine: late fees, overlimit fees, account management fees, copying fees, customer service fees, fees on top of fees. Some credit card issuers actually earned more from fees then they did from the more traditional banking activities I just described. These were called “fee harvesters,” and once a consumer incurred one of their fees, he or she often became locked in a cycle of debt where the bank kept adding fees on top of fees, and the amount the consumer actually used the credit card for became negligible next to the accrued fees. Congress passed a law restricting some of these fees, but some banks still charge them – illegally. If you suspect you have been charged improper fees, give us a call.

Mortgage lenders jumped into the fray. They started charging all kinds of fees too, which they now must list on settlement statements. Some of these fees may be improper; check your loan documents. If they don’t provide for the bank to charge a fee, then generally the bank can’t charge it. This is particularly so in California in the context of short sales. Check your settlement statement; if something looks funny, give us a call!

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