As was inevitable, legislation is working its way through Congress to regulate the overdraft fees that banks charge their customers. Depending on whom you ask, the fees are either an expensive short-term loan given to account holders without their knowledge, or a customer service and just another way for the bank to show you it loves you. We will leave it to the reader to guess who said what.

Chris Dodd, surely quaking in his boots at the prospect of WWE’s Linda McMahon gunning for his Senate seat (yes, really), has decided he needs to do some actual work and is planning to introduce a bill in the next few weeks that would clamp down on this terrible practice/wonderful favor.

Things get a little tl;dr after the jump. Or the break. Whatever. Just click Read more.

Two banks have decided they do not want any of THAT because Chris Dodd is a big scary man, and to show what outstanding corporate citizens they are, announced plans of their own to scale back their overdraft fee programs.

Bank of America said it would allow current customers to turn off the ability to spend when their account hits zero, starting Oct. 19. Next June, the bank plans to limit the number of times each year that current customers can overdraw their accounts when using a debit card at a store. It will let new customers choose whether they want overdraft protection when they are opening their account.

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. Chase also plans to allow customers to opt out of overdraft coverage.

Oh, that beloved “high-low” processing practice. This is a holdover from the days of paper checks (remember those? I don’t!) when your bank might even process your checks as rarely as once a week, and rarely daily. The official line was that larger transactions were more important, more likely to be your mortgage payment or somesuch, than smaller checks that might be for a gallon of milk. So the bank would run those first both to get them processed more quickly and to be sure the most money was in your account when the check was debited so your mortgage check didn’t bounce. Isn’t that sweet of them?

Of course today, there’s no need for such a practice. Checks are processed automatically, more and more transactions are electronic and could be instantaneous, and the only reason for keeping the practice around is to charge more overdraft fees. I say “could be instantaneous” because often a bank will hold smaller transactions for a few days and may process them after larger transactions have cleared and the account has dropped below zero, charging overdraft fees on transactions that were originally made when the account still had money.

Let’s say on a given day you fill up your car, buy a coffee from Starbucks on the way in to work, grab a quick lunch from the deli downstairs, swing by on the way home and pick up a new pair of pants, and buy some milk at the grocery store. When you get home you go ahead and pay your rent because that’s due tomorrow, as is your car payment so you knock that out too. Due to some poor planning on your part, you’re about a hundred bucks shy of making good on all those transactions that day and logic tells you that what should bounce should be the car payment because you did that last. But that isn’t how it works – the rent goes first, then the car payment – but that still puts you over your limit. No worries, the bank has you covered. It goes through, with a $30 overdraft fee, as do the gas, coffee, lunch, pants, and milk. High-low processing effectively made the bank an extra $150 that day when it otherwise would have only made $30.

There are a number of fails in that scenario.

First, of course, is the hypothetical “you” for not keeping track of your account balance better. Shame on you.

Second, is the high-low processing that’s being exploited now to wring the maximum number of overdrafts out of customers who are either irresponsible or genuinely unable to make ends meet.

Third is the overdraft fees themselves. You don’t opt into those; chances are, you can’t opt out either. Go ahead, call your bank and ask. They may actually laugh at you when you say you’d rather transactions be refused when you can’t cover them.

Fourth is the sheer number – rather than being still in the black with your car payment unpaid, you’re $250 in the red – $100 for the amount you were originally short plus $150 in overdraft fees you never expressly signed up for. That $30 charge on your $5 coffee is roughly equivalent to 500% interest, which would be usury if it were an actual loan. A payday loan might be cheaper.

However, the biggest fail of all is still you, for not being aware of how the system is set up not only to knock you down, but also to kick you when you’re down there. Because now you’re going into tomorrow $250 in the hole, and you’re not getting paid for another three days. More $30 fees are likely until then, and even then you’re starting out the next pay period a few hundred bucks lower than usual, potentially setting you up for more fees still. Meanwhile your bank is laughing all the way to the bank. Or something.

The point is, banks collectively make billions (with a B) every year from overdraft fees, to the tune of $37b in 2008. And even if overdraft fees themselves are pared back or eliminated, banks will find new sources to replace that lost income.

A few examples? BoA will let you link another account to your checking account for overdraft protection, but will charge you $10 for moving your own money from one account to another each time. Chase will charge you $50 for not saying “Bless you” when someone sneezes in one of their branches. Citi is supposedly considering charging each of its customers $10 every time it isn’t profitable. Still, good on BoA and Chase for making a gesture that sort of resembles the right thing.

Anyway, the moral of the story is that everyone wants your money and you should keep it buried in a jar in your backyard because if you put it in a bank you will never see it again.