Overdraft "protection"

A good editorial from the NYT, which rightly calls out the abusive banking practice known as "overdraft protection":

Some bankers claim the system benefits debit card users, allowing them to keep spending when they are out of money. But interest rate calculations tell a different story. Credit card companies, for example, were rightly criticized when some drove up interest rates to 30 percent or more. According to a 2008 study by the F.D.I.C., overdraft fees for debit cards can carry an annualized interest rate that exceeds 3,500 percent.

Overdraft protection is really just a loan--a loan that occurs without borrower opt-in, that does not make the borrower aware of the loan's terms, and that comes attached with usurious interest rates. It needs to be regulated like any other kind of loan.

(Photo by The Consumerist)