Tag Archives: loans

Perhaps Some Progress on Payday Lending Rules in USA

New Orleans   Payday lenders could not operate without the collaboration of the big money center banks.  They are financiers providing the dollars being lent in predatory fashion to desperate lower income families.  They are also the loan collectors by facilitating drafting from borrowers’ accounts to service the loans for the payday lenders, sometimes on multiple occasions as we all saw in the recent JPMorgan Chase scandal.  Finally, it appears with some prodding from Congress, the Office of the Controller of the Currency (OCC) and the Federal Deposit Insurance Commission (FDIC) are moving to clamp down on some of the big banks payday lending business, especially that of notorious bad actor, Wells Fargo, and U.S. Bank, both of whom have been bottom fishing to compete against the most predatory players.

             The new standard being proposed, similar to the recent consumer and low income advocate gains around home mortgages and other work done by the new Consumer Financial Protection Bureau (CFPB), would reportedly stress “affordability,” meaning that a loan could not be made where there was not a reasonable expectation of the borrower’s ability to repay.   As ACORN Canada studies on payday lending have thoroughly shown the first loan often leads to a series of similar loans over a 15 month period as the borrower tries to extract themselves from the loans with repeated additional loans, deepening their financial crisis.  Importantly, the government agencies are going to bar any additional loans for 30-days between loans and would not allow additional loans until the first loan is paid off. 

            Some of these so-called direct-deposit loans or “checking account advances” as U.S. Bank calls its product seem frighteningly like the tax preparer “advances” in anticipation of refunds, but of course payday loans are by definition marketed as loans against the coming payday, even if the borrower is out of work without a payday in sight.  Hiding behind the notion that these loans are an “advance” and for the “convenience of the customer,” banks are also not disclosing the level of the interest rates involved, which are exorbitant, as you would imagine.  “Convenience of the customer” must be a euphemism for describing the desperation faced by the borrower.   Wells Fargo spokespeople, according to the New York Times, also tried to hide behind the facade that they were just lending a hand to customers facing an “emergency situation.”  Well, yeah!   Too little money and too much month!  Come on, boys!

            All of this is pure and simple loan sharking and part and parcel, of the criminal enterprise that big time banking has become these days, so it is refreshing to think that some of the regulators might be waking up and starting to do something about it.  Hopefully they will move from the big fish to the little fish soon and go after the whole payday lending industry, which has been thriving in the great recession.

Audio Blog of Payday Lending

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Chase and Other Banks Need Policing & Regulation on Pay Day Lending Abuses

Little Rock       It takes a lot of newsprint and video clips to bring Jamie Dimon, the arrogant chief of JP Morgan Chase, one of USA’s largest banks, down but stories in the Times picked widely of Chase enabling predatory on-line payday lenders by allowing hundreds and thousands of overdraft and other fees to empty workers’ accounts when payday companies tried to collect payments scores of times over a matter of days.  He claimed he was going to fix the problem.  It is clear his fix is the same as the “fix is in,” and is a wave at the problem without any real reform.

Dimon and Chase claim they will only stop assessing NSF (non-sufficient fund) charges when an account is empty rather than continuing to kill the dead horse.  To respond to the problem with customers having paid off the loan but being unable to stop the payday predators from continuing to access automatic withdrawals, Chase claims they will “better train” their workers.  Are you kidding me?!?  That’s another way of saying, good luck, Charlie!  Chase claims that they will make it easier for customers to leave Chase and close their accounts to stop them from being raided with Chase’s help by letting people close if Chase itself deems the charges “inappropriate.”  They say they will alert the Automatic Clearing House (ACH) which manages the transfers about frequent abusers.  This is a bank tool, not a regulator!  This is no reform.  This is in fact is the same as saying you will do nothing, but simply using more words to say nothing.

Even more unbelievably though Chase is greeted with applause for doing nothing because Bank of America, Wells Fargo, and others said nothing, meaning they intend to do nothing or at least are waiting to see if they can get away with it.

Somewhere in all of this the fact that Chase and the rest are enabling a criminal conspiracy seems to be lost.  By allowing deductions they are “aiding and abetting” a crime since many of these on-line companies are skirting state laws capping interest and regulation payday lending.

Dimon and Chase are simply putting a fig leaf in front of the fact that they should be vetting the transfer process and instead are joining in the fleecing of their customers through illegal activity.

Jessica Silver-Greenburg reports that:

The changes come as state and federal officials are zeroing in on how the banks enable online payday lenders to bypass state laws that ban the loans. By allowing the payday lenders to easily access customers’ accounts, the authorities say the banks frustrate government efforts to protect borrowers from the loans, which some authorities have decried as predatory.

Both the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are scrutinizing how the banks enable the lenders to dodge restrictions, according to several people with direct knowledge of the matter. In New York, where JPMorgan has its headquarters, Benjamin M. Lawsky, the state’s top banking regulator, is investigating the bank’s role in enabling lenders to break state law, which caps interest rates on loans at 25 percent.

Let’s hope the government acts quickly and aggressively, because Dimon, Chase, and the rest of the gang are clearly just shaving off a couple of pennies here while they help clean out working families bank accounts.  There ought to be a law, and in fact thanks to some states, there are laws.  Now we have to see if these folks are going to enforce the law, because that’s all that can stop this.

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