June 17, 2013
Big Banks Have Found Another Way to Rip You Off
Posted on Feb 24, 2013
Meet the major banks’ newest partner: payday lenders! These are the owners of those check cashing stores that offer short-term loans with interest rates that sometimes exceed 500 percent.
The payday loan industry typically preys on the poor and ends up costing Americans billions each year. More and more, the practice is either being outlawed—it’s illegal in 15 states—or subject to heavy regulations.
But that’s not stopping the predatory lenders; they’ve just shifted their loan operations offshore and online.
Now big banks such as JPMorgan Chase, Wells Fargo and Bank of America are getting a piece of that lucrative financial action, helping to ensure that predatory payday lenders get their money—even in states where the making of such loans is illegal. The banks don’t actually fund the loans, but serve as a critical intermediary between the lender and the customer. When a borrower can’t repay a loan, the bank gives the lender access to the customer’s account to withdraw the money owed. And, because the payment amount often exceeds the person’s account balance, the bank gets a nice payday in the form of overdraft fees.
The partnership, needless to say, has been very beneficial to the banks. Whom it’s not beneficial for: anyone who goes through a payday lender to get a short-term loan. Once again, Main Street gets screwed.
—Posted by Tracy Bloom.
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