New Orleans In an excellent piece the Times looked at the gross profiteering on the major to-big-to-fail bailout banks like Wells Fargo, Chase, and Citibank and their unseemly and immoral role in fleecing the hapless lower income customers of payday loans through their bank draft procedures. By hitting accounts repeatedly, even when already recognizing overdrafts, banks are able to pyramid fees astronomically until they have larded up charges in the thousands of dollars on some of the accounts, turning a relatively small loan of $400 or so into a giant burden three and four times that amount. These loans start by being predatory, and with the banks’ eager assistance end up being confiscatory…at least when there is any money to try to squeeze out of the rock.
The fact that so many of these payday lenders are offshore and online only adds to the incredible seediness of this whole enterprise, since the banks are the codependent enablers of outfits that are deliberately organized to escape state regulations in some places that are meant to cap interest rates and their predation. Some of the rates are in the hundreds of percentage points, making this operation yet another criminal enterprise.
As bad as all of this is, I’m sure it is only half the story! As sure as I’m pounding these computer keys, I would bet any cash in my pocket that these same banks and others like them are also the financiers behind these same payday lenders and in some cases may even have investments there.
I can vividly recall sitting in Washington DC in a negotiating and review session with Wachovia in 2006 or so when there was still a Wachovia and watching them scrabble as Jordan Ash, on ACORN’s campaign staff, detailed his research about their payday lending ownership and investments, which they had previously denied having. The same research had indicated similar participation by the other big banks in payday lending because they were the financiers as well for the payday lenders.
Money for such loans doesn’t grow on trees after all for these pirate predators anymore than the rest of us. Wachovia then argued with some truth that it wasn’t a huge part of their business, and all of them could have said the same, but that was largely because their overall business was so huge. Their business was in the 8-figures, just as some others were in the 9-figures, and in these 10-figure and 11-figure outfits, that’s small potatoes.
We need big banks that want to claim to be citizens in our larger community to stop profiteering from lower income and working families who are strapped for cash and can only find the few bucks to make it through the month from payday lenders. These should be violations of their community reinvestment records. You should not be able to claim credit for investments from the same communities where you are stealing precious dollars by enabling predatory lending.
The big banks need to offer small, affordable loans directly at reasonable interest rates, and they need to divest themselves of interest in payday lending outfits while stopping the practice of pyramiding unreasonable charges and drafting of individual accounts.