Excessive Bank Fees? How Does 79.9 Percent APR Grab You?

San Diego, CAThe propensity of banks and other financial institutions to charge excessive bank overdraft fees and other excessive bank fees has raised the ire of at least one Congressman. Senate Banking Committee Chairman Chris Dodd (D-CT) said back in September that he would introduce legislation to "protect Americans from excessive checking account overdraft fees."

But overdraft fees are only half of it. Also at issue are a basket of other fees that some banks, in some states are foisting on those who can least afford to pay. And unless you read the fine print, the customer has no idea.

Take what happened to Gordon Hageman, a wine distributor in California with credit that is described as imperfect, but about average. He recently received in the mail a pre-approved Premier credit card from First Premier Bank of South Dakota. According to an NBC report, First Premier refers to itself as the 10th largest issuer of Visa and MasterCard credit cards in the US and "focuses on individuals who have less than perfect credit but are actually still creditworthy," says the bank's web site.

On the surface, a laudable service. However there was no reference to the interest rate on the actual offer, so Hageman did what most Americans don't bother to do: he read the fine print. Only then did he realize the interest rate the bank was intending to charge him.

Hold your breath: 79.9 percent.

San Diego State marketing professor Michael Belch told NBC that in his view, "I think you're beginning to border on deception there," he said of the offer and the outrageous interest rate that was hidden from view.

"They're just finding different ways to gouge the consumer."

But it all looks perfectly legal. A spokesperson with the Federal Deposit Insurance Corporation (FDIC) told NBC that interest rate limits on bankcards are set by the individual state.

In South Dakota, there is "no maximum or usury restriction" according to text posted at the South Dakota Legislative Web site. What that means, is banks in South Dakota can set their own interest rates without restriction. If they want to charge you 100 percent, they can. And as long as it's reflected in the fine print, they're covered.

Legal? Yes? Good moral stewardship? You be the judge.

In this particular case the Attorney General's Office for the State of California says the card was issued to Hageman from another state and thus is beyond the confines of its jurisdiction.

There's no word on whether Hageman activated the card with a 79.9 percent APR.