LOW AND MIDDLE INCOME CUSTOMERS SHOULD BEWARE OF BIG BANKS CHASING HIGHER FEES: ??Consumer Protection to the Rescue

There was a recent report about some large global banks trying to steer or entice low and middle income customers, who do not normally use banks, into relatively expensive products. This has been described as a potential $ 45 Million market. These banks are responding to billions of lost income due to recent regulations placing limits on interest and fees on debit and credit cards. The banks are now competing with non-banking check cashers, payday lenders and pawnshops.1

The products the banks are offering include prepaid credit cards, short term loans, money transfers as well as check cashing and payday loans which all may carry hidden high costs. Automatic withdrawals when loans become due may lead to unexpected overdrafts and other fees that could add up to annual interest rates of as much as 300%! as reported by the Center for Responsible Lending.  Mark Williams, a former Federal Reserve Bank examiner, is quoted as saying, “It is a disquieting development for poor customers. They are getting pushed into higher options”.

Help is needed in insisting that these banks clearly disclose all their actual and possible fees. Richard Cordray, newly appointed head of the Consumer Protection Agency [created by the often maligned Dodd-Frank Bill and resisted by the Republicans] says ”We look at alternative financial  products offered by both banks and non-banks through the same lens—-what is the risk posed to consumers? Practices that make it hard for consumers to anticipate and avoid costly fees would be cause for concern”.

IPPA hopes that the concern he anticipates will result in significant action protecting these vulnerable customers.

Notes. 1.  http://www.nytimes.com/2012/04/26/business/chasing-fees-banks-court-low-income-customers.html?_r=2&ref

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