Banks Try To Seem Cool By Acting More Like Payday Lenders


ceci n'est pas un bank

Various and sundry anti-poverty activists are always looking for ways to get the "unbanked" to take their money out of their mattresses and put it in a gosh darned checking account like the rest of us. Well, congrats. Sort of. A headline in today's New York Times blares, in part, "Banks Court Low-Income Customers." But the first chunk of that headline is the real explainer: "Chasing Fees, Banks Court Low-Income Customers." 

It turns out that—gasp!—the 2010's revamp of the nation's major financial institutions, the Dodd-Frank Act, did not exactly vanquish banking products that cost more money if you don't happen to have very much money. The idea was to discourage banks from (over?)charging for overdrafts, bounced checks, and the like.

Instead, traditional banks starting hanging out with the goth kids and smoking behind the music wing started offering less traditional products, such as short term loans or pre-paid debit cards precisely because these products are subject to less regulation:

[Traditional banks and credit unions are] joining the prepaid card market. In 2009, consumers held about $29 billion in prepaid cards, according to the Mercator Advisory Group, a payments industry research group. By the end of 2013, the market is expected to reach $90 billion. A big lure for banks is that prepaid cards are not restricted by Dodd-Frank financial regulation law. That exemption means that banks are able to charge high fees when a consumer swipes a prepaid card.

In other words, the regulations pushed banks to act less like their respectable selves and more like their disreputable competitors. Nice work, Congress.

Check out the whole story on the rise of payday lending and the fall of free checking.

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  1. Nothing a few more regulations can’t fix.

  2. “The bank that does not advocate the cool crime of usury!”

  3. echo “ALT text”|nice

  4. Do you mean to tell me that laws have unintended consequences? Gosh oh golly, who’d ha’ thunk it?

  5. You missed this from the first page of the article you cited:

    Still, in an April survey of prepaid cards, Consumers Union found that some banks’ prepaid cards come with lower fees than nonbank competitors.

    So the law has resulted in marginal improvements.

    1. There are very few actions which have absolutely no upside. Even politicians provide fodder for (im)morality plays. What is your point?

  6. There simply must be a way that can be found to teach the people who are not normally full banking customers how to avoid the vultures masquerading as bankers. However, when one gets caught up in taking a loan to cover expenses prior to the paycheck, there is no way out of a hole like that except to pay it off and literally do without even if it is a struggle until the paycheck comes. The way the banking industry is acting and our government is not protecting citizens, should make people realize that calling it “capitalism at work” and all the other epithets are just so much cover for thievery.

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