Do banking customers opt in to overdraft protection on debit card charges because they want this high-priced service or because they’ve been tricked into saying yes by aggressive or deceptive marketing?
The Center for Responsible Lending, or CRL, a nonprofit organization that seeks to protect homeownership and family wealth by working to eliminate abusive financial practices, thinks marketing is more at work than choice.
The center is no stranger to controversy or (apparently) capital letters. In a recent statement, the center says -- quoting here -- that banks and credit unions:
• Do NOT tell customers they won't be charged a fee when the bank declines a debit card purchase that causes an overdraft. As a result, some consumers believe they will be penalized for overdrafts if they don't opt-in.
• Present customers with a FALSE CHOICE between no overdraft coverage or a high-fee overdraft program.
• Do NOT fully inform customers about lower-cost options such as a line of credit or a link to a savings account.
• Subject customers to relentless, MISLEADING MARKETING aimed at steering people into the highest-cost product.
• WRONGLY IMPLY that a debit card won't function correctly unless a customer opts in or that high-fee coverage has some advantage over lower-cost options.
On the one hand, it seems egregious for banks to market such a high-cost service so aggressively, especially when they've been forced at the point of law not to add on the service automatically without any say-so from the customer, who may or may not want it.
On the other hand, many businesses engage in marketing that doesn't tell all the bad along with the benefits. After all, the promotion of a product's best aspects is pretty much the whole point of marketing in the first place. And, it works. That's why companies, banks included, spend so much money on it.
So we have to ask: Are banking customers opting in because they're misinformed or they want the service? Are the banks' marketing efforts "aggressive and deceptive" or par for the course in advertising generally? Can customers make an informed choice or are they being bamboozled into overdraft protection services?
What say you?