Credit Where Credit Ain’t Due

Two large debit-card issuers have suddenly decided to clean up their acts in the face of pending legislative action against them. The bigger question is: what’s to prevent them from pulling a bait and switch, first voluntarily revising their rapacious practices and then, when the threat of legislation dies down, ramping those practices right back up again?

As summarized by the New York Times,

Bank of America and JPMorgan Chase, two of the nation’s biggest banks, announced plans on Tuesday to drastically overhaul their debit card programs by lowering or eliminating fees, changing the way they credit transactions and allowing customers to opt out of overdraft protection. The moves come as lawmakers and regulators in Washington push proposals to reform what critics say are excessive charges of which consumers are unaware. The penalties, known as overdraft fees, bring the banking industry tens of billions of dollars in revenue annually.

The reporter who wrote this piece, Ron Lieber, has as a rule been unusually aggressive in trying to tell readers in plain English about the industry’s regularly punitive and deceptive practices. This time, though, he seems not to have been given the ink to properly explain. Here’s an example of a confusing technical description:

Chase plans to eliminate by the first quarter of next year a common industry practice that enraged many consumers. Instead of lumping a day’s worth of debit card and A.T.M. transactions together and then processing the highest amounts first — a practice that has caused large numbers of consumers to overdraw more quickly and pay more fees — it will credit the transactions chronologically. . . .

Perhaps those with degrees in economics understand how this works, but not the rest of us. In that sense, Lieber’s bosses do a disservice by not authorizing additional space. (Lieber got just 763 words to lay out the whole thing.) Most importantly, as seen in the lead paragraph, above, Lieber was not able to do more than tacitly acknowledge the connection between the banks’ actions and their fear that Washington will impose mandatory rules on them. And he was not able to explore the actual consequences of the banks’ actions. Or to tell us whether these moves are likely to amount to something permanent and substantive—or are just one more reach into the financial industry’s bottomless bag of tricks.