Looking out for seniors

Saturday, June 28, 2008 | 2:09 a.m.

There are laws on the books that call for harsher than normal penalties against criminals when their victims are senior citizens on the grounds that seniors are among the most vulnerable members of society. It stands to reason that harmful business practices that target seniors ought to be dealt with more harshly as well.

That is why the Federal Reserve Board should pick up a report issued June 18 by the Center for Responsible Lending, a nonprofit Durham, N.C., organization known for speaking out against predatory lending. The report, “Shredded Security: Overdraft Practices Drain Fees From Older Americans,” represents an indictment of a lending industry that for too long has been allowed to run amok with its unreasonable overdraft penalties.

In a reversal of Bonnie and Clyde, banks and credit unions get away with robbery by enrolling consumers in costly overdraft programs, often without prior approval. When hapless customers use debit cards and mistakenly overdraw their accounts, they often get penalties that exceed the amount they “borrowed.”

The report found that Americans 55 and older pay $4.5 billion annually in overdraft fees, including nearly $1 billion from Social Security income. One senior featured in the report paid $448 in overdraft fees for $210 in credit from her bank. Had the bank issued her a standard credit card rate to cover her overdrafts, she would have paid only about $1 in fees instead of $448.

The Federal Reserve, the nation’s leading banking regulator, would do seniors a big favor by requiring lenders to get customers’ approval to opt into overdraft programs, rather than have consumers opt out. Give seniors the opportunity to decline purchases when they are informed they do not have adequate funds. Or limit the number of overdrafts they can have annually to guard against mounting debt. If these steps are not taken, we would encourage seniors to open accounts only with banks that are willing to give them less expensive lines of credit so they are not needlessly gouged by high overdraft fees.