According to BusinessWeek (registration required), some banks now make over 75% of their money from hidden fees on their customers -- account
closing fees, customer service fees, and many more. All in all, these service fees raked in $32 billion for the banks in 2004.

That means each American family spends almost $300 on surprise fees every year, on average. Many pay nothing, of course, but that also means that millions pay even more.

"Protection" fees (super short-term loans to cover checks before they bounce) are some of the biggest and the worst. Banks let you choose at the time if you want to pay $1 and use another bank's ATM. But the bank never told college student Chris Keeley that his $230 worth of Christmas presents would cost him $447.

That's because the $217 in (unrequested) "overdraft protection" never showed up on his receipt -- until the bill appeared right after Christmas. Only after the gifts were unwrapped did Chris's bank let him know he had accidentally taken out a "loan" at 1130% annual interest.

Banks used to profit when they lent responsibly and kept deposits safe. Now they profit by springing fees on depositors that put their savings at risk.

Some people will say, Chris should have read the fine print. Sure. (I'm a lawyer-to-be, what else can I say?) But his real mistake was much bigger. He trusted his bank, assuming they wouldn’t gouge him the minute they got the chance. Nowadays, that’s a high-cost assumption.

What’s good for GM is good for America, but what’s good for regular citizens isn’t?

As Robert Reich points out in American Prospect, there’s a double standard in bankruptcy law. While the recent bankruptcy bill makes it harder for regular citizens to declare bankruptcy, corporate bankruptcy law continues to allow large businesses to operate while sloughing off their obligations to employees and shareholders.

Corporations can declare bankruptcy and gain protection from creditors whether the underlying reason was a genuine catastrophe or sheer mismanagement. Under the new law, even consumers who face crushing debts because of genuine uncontrollable catastrophe (like a medical emergency) are denied the benefits of brankruptcy.

In the first quarter of this year, consumer spending represented 71% of TOTAL US economic output (GDP). Individual citizens drive the US economy, and what’s good for consumers IS good for America. Citizens who face severe financial constraints because they have a medical catastrophe should have at least the same breathing room offered to corporations.

Individual citizens should be entitled to the same protections as large corporations.

James Weingarten is a new member of the team and fellow law student. A formal introduction to the newest members of our blog team is forthcoming. -MN

Time Magazine's take (payment required) on the bankruptcy problem:

Once upon a time, when both morals and money were harder, bankruptcy was bad. Wastrels used to be bailed out by their better-off relations in order to save the family name from the stigma. But in these days of looking-glass economics, bankruptcy is growing more and more fashionable as a way to settle one's debts and land some more credit.

The story, "Making Bankruptcy Pay," appeared on February 22. The year: 1963.

Bankruptcy opponents have been recycling this "once upon a time" line for the past 42 years (and then some). But it looks like our morals still had a long way to fall since '63. Check out law professor Todd Zywicki's Congressional testimony in February of 2005:

Regrettably, the personal shame and social stigma that once restrained opportunistic bankruptcy filings has declined substantially in recent years.

They can't both be right, can they? Maybe values repeatedly drop, then sermons like Time's and Todd's repeatedly restore them. That would mean morals were in a tail spin through the '50s, and hit rock bottom by early '63 -- just ahead of the Beatles' socially corrosive hit "I Want To Hold Your Hand."

Or maybe morals have been in decline since the stone age. Consider this Congressional testimony:

Dishonest people make it a practice to go into debt to these merchants for the necessaries of life and then seek the bankruptcy courts to get relief from the payment of such debts. We ought to go back to the old-fashioned primitive doctrine that requires the payment of all honest debts. . . . Let us go back to honest and fundamental principles.

Yes, as this 1910 Congressman nicely observed, recent moral downturns must be to blame for all these opportunistic bankruptcies. We would all be better off if we returned to a primitive age of honest and fundamental principles.

Now, if you'll excuse me, I have to finish my hunting and gathering.

[thanks to David A. Moss, Gibbs A. Johnson, The Rise of Consumer Bankruptcy: Evolution, Revolution, or Both?]

Jon Lackow is a new member of the team and fellow law student. A formal introduction to the newest members of our blog team is forthcoming. -MN