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Are banks contributing to consumer bankruptcy?

With online payment options and automated payments becoming increasingly normal, few people operate without some type of bank account. Having a bank account can provide a myriad of benefits, including easy access to financial information and the ability to quickly cut off unauthorized spending. However, one aspect of commercial banking could be a driving force in consumer bankruptcy.

Spending more money than is actually contained within a checking count is considered overdrafting, a phenomenon that typically impacts people in Washington who are already struggling financially. The Consumer Financial Bureau revealed that 8 percent of people who have banking accounts end up paying 75 percent of collected overdraft fees. In addition to chronically being in the negative, people who overdraft are typically hit with fees that push their negative account balances even lower. These individuals typically shell out so much in annual overdraft fees that it usually totals up to the household's weekly income.

Banks have been collecting more and more overdraft fees, with JPMorgan Chase and Bank of America both seeing a 6 percent increase from them in a recent quarter while Wells Fargo's income revenue from these fees shot up a startling 14 percent. This drastic increase might be good for their bottom lines, but the impact is pushing some people further into financial crisis. A 26-year-old accountant who lost his job began racking up $35 overdraft fees every time that creditors attempted to withdraw payments from his banking account. In the span of two months, his bank account hit about negative $1,400. Even with a new job and checking account, bankruptcy might be the best option for him to fully address the overdraft fees and loans.

Advocates are in the process of lobbying for better regulations regarding overdraft fees and the order in which banks process charges, which have long been a strategy used to garner more fees from consumers. Until significant changes are made to current banking regulations, Washington residents who are continually pounded with overdraft fees might ultimately find themselves similar, overwhelming financial situations. Consumer bankruptcy typically provides a smart alternative to floundering in debt while simultaneously paving the way for a stable financial future.

Source: triblive.com, "Big banks cashing in on overdraft fees", June 18, 2016

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