Business

How you describe something—the words you use—can dramatically affect perception. That’s the entire principle behind the business concept of “market positioning” as laid out in the seminal book, Positioning by Ries and Trout. Call Government insurance claims adjustors “death panels” and you can get a populace up in arms. As long as you don’t call private insurance claims adjustors the same thing, that framing can easily be used to get people extra-scared about government health care funding, while quietly directing attention far away from the private insurance adjustors who routinely find reasons to refuse or limit claims for necessary procedures.

Today I’ve noticed a business practice that uses a clever description to engage in the purest form of class warfare I’ve ever seen.

Class Warfare Meets Janice

From what I can gather, when people use the phrase “class warfare,” they are referring to one socioeconomic class deliberately targeting another socioeconomic class for purposes of exploitation or taking what they have, ultimately without really doing anything to deserve it.

Let’s think this through. How do you know someone is in financial straits? Well, if they are having trouble making ends meet, and occasionally overdraw their bank balance.

Let’s consider a not-so-hypothetical “Janice,” who uses the same bank as I do. Janice is a house cleaner, who lives month-to-month with barely enough to pay her bills. Janice has a larger-than-expected automatic payment go through her checking account for $350. The bank charges a $35 overdraft fee, plus $5 every three days as a “continuous overdraft fee.” There’s an amount of money Janice is expected to pay back ($350), and the bank has temporarily allowed Janice to use that money. They not only charged a 10% immediate fee, but they are charging a 1.42% fee every three days, and they expect to receive the money back.

IN WHAT UNIVERSE IS THIS NOT A LOAN???

And on an annualized basis, $5/3-days on a $350 balance is $608 per year. $608 interest on a $350 balance is a 174% effective interest rate. If you fold in the $35 initial fee, that brings the interest rate to 184%.

184%. And by calling it a “fee” instead of a “loan,” the bank gets to charge 184% interest.

And note: this is the most reasonable way to model the situation. If Janice had paid the $350 back the next day, she would still have been charged $35 for a 1-day loan, which is an effective interest rate of 3,650%. Yes, you read that right. By paying back her loan after one day, she was charged 3,650% interest.

These People are Stealing Janice’s Money

Who gets that money? The rich people who own the bank.

If this isn’t the purest, most exploitive, outrageously usurious example of class warfare, in which the rich target those who are explicitly out of money and charge them fees that make Mafia loan sharks look like amateurs by comparison, I really don’t know what is.

So what’s the solution? Well, other than a return to the early 1980s, where banks paid interest and didn’t charge fees, and when overdraft fees were more like 18%/year at the most, I don’t know. Apparently that scenario is considered to disastrous and horrible to contemplate (at least by the banks).

Maybe it’s time to nationalize the banks. Please. Because private banks are destroying America. I’m sure my conservative friends will have all kinds of reason why this is a bad idea. They will shriek and tear their hair out because I am suggesting something that is so UNFAIR and SOCIALIST. But then, having enough money so they don’t get overdrawn, they are never routinely charged 36,000% interest on their overdraft loans. Instead, they scream bloody murder at the thought of having their top marginal tax rate increased by 2-3%, because that’s so horribly crippling that no sane $150K/year person should have to bear that unspeakable horror. And as for Janice and her 184% bank loan, well, that’s just the penalty she pays for the crime of being poor. I agree there’s crime being committed to here—not legally, but morally and ethically—and it sure isn’t coming from Janice.

CORRECTION In the first revision of this article, I erroneously wrote that the $5 “continuous overdraft” fee was weekly, and Janice’s effective interest rate for a yearlong overdraft was 74%. Further reading of the bank’s fee schedule reveals that it is every 3 days, not weekly, thus bringing the interest rate to 174%.