Category: Banks

In an article in Business Week titled, Banks May Use Payday-Style Loans to Replace Lost Overdraft Fees, analyst predict the use of “payday loan” type products to recover the more than $15 billion in lost nsf fees.

“Legislation pending in Congress would exceed the Fed’s rules, limiting banks to one overdraft fee a month or six a year. Banks collected about $38 billion in overdraft fees last year, said Michael Flores, a management consultant whose clients include Citigroup Inc. and Wachovia Corp. He said the loss of revenue from the rules may be from $10 billion to $15 billion a year.”

This is pretty big news.

A little off topic, but interesting none the less.  Some of the changes include:

“Card companies must now tell customers how long it would take to pay off the balance if they only make the minimum monthly payment. Customers can only exceed their credit limit if they agree ahead of time to pay a penalty fee. And unless a cardholder misses payments for more than 60 days, interest-rate increases will affect only new purchases, not existing balances.”

You can read more in the Wall Street Journal.

A journalist for the Washington Post estimates that 60 million people have limited or no access to banks or other traditional financial services.

The article is more of a call to arms for banks. It’s titled “FDIC: Quarter of U.S. households have limited or no access to banks.”

I think this journalist is backing into a belief that banks offer cheaper services than other financial institutions. This is not the case. Just yesterday, an op-ed in the Boston Globe ripped banks for charging excessive fees money order compared to check cashers. I also think a payday loan is cheaper than an nsf.

Just because banks offer free checking, does not mean they’re some not-for-profit operation.

I expect a little more from NPR. This reporter is pronouncing payday loans dead b/c the FDIC got banks to put $28M on the street and now no one’s taking out payday loans?

That’s like saying Pfizer is selling their prescription drugs direct, so Walgreens is going out of business.

At IowaPolitics.com, we know that Wells Fargo does business with 9 substantially large lenders including: including Advance America, Ace Cash Express and Mister Money.

Capital is a rarely discussed subject among lenders, although it’s probably the most important component of the business. You can’t get big without financing, whether it’s bank money or investor money.

Banks run lots of fancy commercials that contributes to their image, but when it comes to working their system, they’re near the top.

This USA Today article titled Anger at bank overdraft fees gets hotter, bigger and louder is all over the Internet. What I think is remarkable are the 893 comments that have been posted. You don’t have to read long, before you run into this one:

“I am disgusted with BofA. Just recently I knowingly used my debit card for a transaction that would overdraw my account, because I believed that the transaction was worth the $35 overdraft fee. It was $115 charge at a pharmacy for liquid Tamiflu. My 8 yr old daughter had a raging fever, and had tested positive for H1N1. What choice did I have?? I didn’t. Little did I know, that BoFA handles transactions from highest to lowest. So, the $115 was taken out first & then the previous 7 very small transactions from earlier in the week. Sadly, I had cash ($789) at home to well cover the expenses, but with the urgent trip to the doctor, missing work, etc, I just didn’t have time to get it to the bank. I did manage to get it to bank 3 days later when my daughter’s fever finally broke. Well, then I have bills hitting my account, water, phone, electricity. This activity turned me over. So, my trip to the pharmacy turned out to be $595 in late fees all within a matter of 7 days. Now, would I make that same decision to make that transaction at the pharmacy that day, yes. Will I continue to bank with BofA. No. I even went to the branch to dispute some of the fees, and the customer rep couldn’t make sense of some of the fees.”

You wonder if banks can make money if overdraft fees are taken away? Wouldn’t that be a a dirty little secret?
[wpfp-link]

Banks are raising their NSF fees. The average fee increase $2.50 to $27.50 this year.

The thing with NSF’s is that since banks charge them, they’re ok or acceptable. I wonder why that is?

Here is a NSF horror story.:

Bank customer Laurie Harris:

You can read the full article in the Washington Post title The Bite of Bank Fees.

Head over to Payday Pundit and find out why a woman paid $37 for a Starbucks coffee drink.

Fifth Third Bank is now offering payday loans. They call it “Early Access Checking”. I think this is great. More competition means the customer wins.

Here’s how their product works: You must have a job and direct deposit. The term of the loan is 35 days and the rate is 120% or $10 per $100 borrowed. The full advance is automatically debited from your account.

Now, they can offer the product at this price point b/c they have total control over the customers bank account. Non-depository payday lenders do not have that luxury, so of course, their loan losses are going to be higher.

You can read the full article in bizjournals here.