the New Loan Sharks

[jazkiljok]

http://redtape.msnbc.com/2007/01/debit_cards_fue.html#posts

interesting article on debit card fees for overdrafts.

the banks act like they're doing you a favor when the offer this "courtesy" service-- but they dont' mention fees. instead of the flat embarassing but fee-less turn down on your card-- you get slapped with 30-40 bucks to pay for that 1.50 coffee.

the banks love to give you a short term loan-- and charge interest that the mob would envy.

it's sad that the banks target the lowest income folks for these fees-- yes, perhaps a bit irresponsible not to check their accounts-- but if you ain't got cash in the bank- you probably are a poverty level check to check person--- let's face it, the folks with the bucks to pay these fees have the money to never have to use a short term over draft. so it's the low middle-class to poor who get socked with this ridiculous interest fee.

the banks were doing you a favor when your card hit bottom and wouldn't go thru-- now they love it when you spend more than you have. making it even more difficult for these people to improve their circumstances.

loan sharks don't have to operate with any moral compass-- but a least with loan sharks-- you have to make the choice of going to them to borrow that money-- with debit cards-- no one is asking you if you want to pay the vig on that burger-- you don't even know you took the "loan" till you get your statement.

in this respect- banks are operating on an even more vile level than loansharks.

 

[matt.m]

yeah,

I saw this to. No joke. I thought extortion and loan sharking was illegal. Look at all these payday cash advance places. Ridiculous. If you can have a storefront it is ok. It is not ok it the fed doesn't get a cut.

 

[tellner]

Then there are the "Title Loan" and "Payday Loan" sharks. 30-40% a year interest bottom-feeding rat conjugating people of indeterminate ancestry.

Fortunately, the Bush Administration has stepped up to the plate by making it almost impossible to declare bankruptcy, shredding the protections and making sure that even if you do you will continue paying those usurious loans and credit card bills forever.:angry:

 

[CoryKS]

The part I really hate is where they send that guy around to put a gun to your head and force you to use the service. That really stinks.

 

[michaeledward]

Then there are the "Title Loan" and "Payday Loan" sharks. 30-40% a year interest bottom-feeding rat conjugating people of indeterminate ancestry.

nh cash . com is a web site that has small street signs in my area. I purposely spaced that word, so that an internet hyperlink was not created, by the way.

30-40% interest .... that would be a wet dream. These guys charge something like 1,147% interest.

A wonderful example of the Golden Rule ... them that has the gold, rulz ... right.


P.S.

How did that phrase go .. .from my childhood ... Oh yeah ...

Whatsoever you do . . . .
​

Something like that.

 

[Ping898]

This is why I charge everything and just write a check for that specific amount at the end of the month. Even my automatic payments go to my credit card, not my bank account...
The only time I have overdrawn my account was once when I did write a check for something, but the guy promised not to cash it for 2 days, and didn't wait. I made him pay the fees though...

 

[zDom]

Modern day usuary. Bastiches.

It all started with the credit card companies: pure evil. :soapbox:

I've got to say, my bank has a wonderful option: "balance plus."

It is a $300 line of credit that automatically kicks in whenever I overdraft my checking account/debit card.

No $20, $30, $40 charges for ME. It simply draws on that credit line, and then (if I don't just pay it off as soon as I notice it) it automatically deducts $20 per month from my checking account to pay off the loan.

I generally dip into it over a dozen times throughout the year (and immediately pay it back with the next paycheck, or sometimes out of savings account).

Total cost in interest for 2006 was under $10. Not being embarrassed at the checkout line, ganked for huge overdraft fees or otherwise hassled?

Priceless.

 

[tellner]

1147% ?!?!?!

Get a freakin' rope. Bring out the rifles and the portable adobe wall. That's the sort of thing that really should be illegal. Preferably illegal as in "punishable by hanging, drawing, quartering and being left for the army ants."

 

[Grenadier]

Such practices are despicable, but it really should be up to the individual user to track his balance better. If in doubt, don't spend. It's no different than writing a check when you don't know if you have the funds to cover it.

All banks offer overdraft protection. Some will charge a small fee for it each month, others offer it for free. My bank simply transfers the funds from savings to checking when necessary, for a 50 cent fee. I strongly encourage those who get near the zero line on a regular basis to get this protection.

 

[Kacey]

I have a system too - I leave money in my account that's not in my balance. As I have checks not clear (some back as far as 10 years) I leave the money there; over time, it's built up to a reasonable amount. Should I happen to be so careless as to go through all of that, my checking account automatically autodrafts on my savings account - there's a fee (which I can't recall; it's been 15 years since I needed it), but it's lower than the bounce fee, and doesn't go on my credit rating as a bounced check. Now, I realize not everyone can do the former (it took me years to build up an appropriate amount), but the latter is pretty easy, and, in this day of computerized banking, it is easy to transfer funds, and much safer to leave your money in your savings account, where it will earn a (usually very miniscule) amount of interest, and not be immediately available should someone steal your identity and go into your checking account.

 

[Flatlander]

I think that all companies are entitled to charge whatever they choose for their services. Nobody is forcing anyone to use the service. Everyone who opens a bank account needs to sign an account agreement. I wonder how many of these poor, exploited people have taken the time to read the agreements to which they are signatory.

One more reason that personal finance should be thoroughly examined in school. Not touched upon, but thoroughly taught. Seems to me that personal finance is a much more relevant subject to daily life after secondary school than, say, art.

But, let's all be certain to shed a tear for those too silly to understand their banking agreements....

 

[Kacey]

I think that all companies are entitled to charge whatever they choose for their services. Nobody is forcing anyone to use the service. Everyone who opens a bank account needs to sign an account agreement. I wonder how many of these poor, exploited people have taken the time to read the agreements to which they are signatory.

One more reason that personal finance should be thoroughly examined in school. Not touched upon, but thoroughly taught. Seems to me that personal finance is a much more relevant subject to daily life after secondary school than, say, art.

But, let's all be certain to shed a tear for those too silly to understand their banking agreements....

The vast majority of people who are using the check cashing services are those who do not have a bank account - many of them cannot get one, for various reasons, including not having enough money left after paying the bills to open one; many accounts have a minimum necessary to open the account, even if you don't have to have that amount to keep it open. Some don't have a permanent address - another requirement that the working poor (many of whom live in hotels, paying daily or weekly) often cannot meet. Some are illegals (a discussion for a different thread). Some are, as you say, uneducated in their choices - many could benefit greatly from an understanding of their local credit union. Regardless of why these people use these services, it is usurious, and, in many cases, illegal - but no one catches it, because the people most affected are uninformed, poor, and generally don't come to anyone's attention.

 

[Flatlander]

Regardless of why these people use these services, it is usurious,

It seems to me that this statement cannot be made fairly without context. The exorbitancy of the costs cannot be determined without analysing the profitability of the company in question. Furthermore, who are we to determine how profitable a company may be? Supply and demand - the market will determine the fair price, provided there is no collusion or price fixing among competitors (which is already illegal, btw.)

and, in many cases, illegal

Oh? Which cases, specifically? Which companies are currently engaging in illegal pricing regimes?

 

[jazkiljok]

I think that all companies are entitled to charge whatever they choose for their services. Nobody is forcing anyone to use the service. Everyone who opens a bank account needs to sign an account agreement. I wonder how many of these poor, exploited people have taken the time to read the agreements to which they are signatory.

One more reason that personal finance should be thoroughly examined in school. Not touched upon, but thoroughly taught. Seems to me that personal finance is a much more relevant subject to daily life after secondary school than, say, art.

But, let's all be certain to shed a tear for those too silly to understand their banking agreements....

but is it fair to call these folks silly? the article points out that these agreements are one way--- i just recently got a "courtesy notice" of overdraft protection-- it was in the banks promotional flyers they stuff their statements with and that i habitually toss without looking at. it essentially said, don't worry, do nothing, it's going to automatically happen and if i ever need it, there'd be some fees that apply. not one mention of the amount of those fees.

you have a point and i said as much when i posted-- we're all responsible for how we use our debit and credit cards-- but i don't think it's out of line for the average joe to expect that he'd be informed before the fact and in detail about the fees. i also agree with you about teaching personal finance in the schools-- it's grossly neglected and more relevant to peoples lives when they enter adulthood then most other subjects.

also: the poor and undereducated are exploited for that very reason-- that they aren't equipped with the knowledge to comprehend the agreements and the language used when they sign up for accounts and cards. you seem to gleefully condemn them for not being a sharp cookie like yourself-- (i suppose you thought Mr. Potter was the hero in It's a Wonderful Life...)

 

[Kacey]

It seems to me that this statement cannot be made fairly without context. The exorbitancy of the costs cannot be determined without analysing the profitability of the company in question. Furthermore, who are we to determine how profitable a company may be? Supply and demand - the market will determine the fair price, provided there is no collusion or price fixing among competitors (which is already illegal, btw.)

If you have no choice, you don't read the fine print... and even if you do, many people lack the skills to read through the legalese to understand what the forms say. Simply because desperate people use these services, and lack the wherewithal to get out of the hole they dig trying to house, feed and clothe their families - and the majority of people who go to payday services and check cashing stores are the working poor who make too little to catch up if they ever once fall behind - does not mean that fair market price is being charged. If your only choice is to be evicted, or pay $25 for a $100 loan, plus interest (which was a price on a sign I saw on my way home), and it's frigidly cold (our forecast is a low of -3), you'll pay to maintain your shelter in the short term, and damn the long-term consequences, if you even think of them.

Oh? Which cases, specifically? Which companies are currently engaging in illegal pricing regimes?

There are laws about the amount of interest that can legally be charged; there is a current investigation taking place about the short-term loan places, because they charge a flat fee which comes out to an interest rate that is illegal.

 

[Flatlander]

If you have no choice, you don't read the fine print... and even if you do, many people lack the skills to read through the legalese to understand what the forms say. Simply because desperate people use these services, and lack the wherewithal to get out of the hole they dig trying to house, feed and clothe their families - and the majority of people who go to payday services and check cashing stores are the working poor who make too little to catch up if they ever once fall behind - does not mean that fair market price is being charged. If your only choice is to be evicted, or pay $25 for a $100 loan, plus interest (which was a price on a sign I saw on my way home), and it's frigidly cold (our forecast is a low of -3), you'll pay to maintain your shelter in the short term, and damn the long-term consequences, if you even think of them.

So, would it be fair to paraphrase this by saying "Capitalism is bad because some people lack the intelligence to work within that structure"? Is that right?

 

[michaeledward]

So, would it be fair to paraphrase this by saying "Capitalism is bad because some people lack the intelligence to work within that structure"? Is that right?

I think that all of the dependent clause of that sentence could fairly be omitted.

'Capitalism is bad'.

We used to have debates on this site that argued that Pure Capitalism is bad. Pure Capitalism allows those who have accumulated a bit of wealth and power to exert that wealth and power on those that have yet to accumulate wealth and power. There must be some controls placed on the idea of capitalism in the form of regulation to prevent descending to the 'Law of the Jungle'.

Even Shylock was forced to extract his pound of flesh without spilling a drop of blood, as I recall. Into that law, a control was placed.

What we might argue in this discussion is if an 1,147% interest rate exceeds the control mechanisms we desire in our society?

 

[Cryozombie]

"Capitalism is bad because some people lack the intelligence to work within that structure"?

I have a friend who works for a credit card company that's his excuse too... but Im sorry... its not a lack of intellegence, its more like not having gone to Harvard Law.

Try reading some of that stuff somtimes... if it read like "Going over the limits of your card will mean you need to pay a 20.00 fee, and we will not inform you you went over your limit so pay attention to avoid the fee" then I would say it becomes an intelegence thing... when it reads more like:
"The party of the first part will acquiesce to a usury fee of not less than a percentage determined in flux with market APR to be levied not sooner than three days prior to the date upon which minimal balance tranfer is due to the institution issuing the overdraft credit proir to end of month balance calculation" Blah blah...

And even my version is "dummied down" from what those things actually read.

And you think that's bad?? You ever look at the ones that come in the mail that say you are "pre quailified?" Read the fine print on that 500.00 card, there is a 300.00 activation fee... you start out in debt 300.00 bucks on the new credit crud without spending a penny!

 

[Flatlander]

I have a friend who works for a credit card company that's his excuse too... but Im sorry... its not a lack of intellegence, its more like not having gone to Harvard Law.

Try reading some of that stuff somtimes... if it read like "Going over the limits of your card will mean you need to pay a 20.00 fee, and we will not inform you you went over your limit so pay attention to avoid the fee" then I would say it becomes an intelegence thing... when it reads more like:
"The party of the first part will acquiesce to a usury fee of not less than a percentage determined in flux with market APR to be levied not sooner than three days prior to the date upon which minimal balance tranfer is due to the institution issuing the overdraft credit proir to end of month balance calculation" Blah blah...

And even my version is "dummied down" from what those things actually read.

And you think that's bad?? You ever look at the ones that come in the mail that say you are "pre quailified?" Read the fine print on that 500.00 card, there is a 300.00 activation fee... you start out in debt 300.00 bucks on the new credit crud without spending a penny!

Then perhaps there ought to be disclosure laws in place that mandate the sales process so as to ensure that all relevant charges and penalties have been effectively communicated to the client. The disclosure legislation in Canada regarding investments and insurance are a prime example - in a circumstance where material information is not disclosed, the client has the opportunity to sue if they experience financial detriment as a result of non-disclosure. This fact compels those of us in the industry to document our communications, thus ensuring that the client has every opportunity to understand what it is that they're getting themselves into. It also compels us not only to disclose, but to be certain that we've explained things in such a way as to make it understandable to the layperson.

It seems to me that regulating the distribution process of financial products in the interest of consumer protection protects the rights of the consumer to be treated in good faith, and the rights of the company to market their product. With those controls in place, I see no need to regulate pricing or profit.

In the end, restricting a company's ability to create profit by regulating pricing negatively impacts that company's competitiveness. It seems to me that it is always in the best interest of citizens (and investors) that that their companies remain competitive in the international arena, particularly in the context of globalization. Remember, this relates directly to the performance of your pensions/401K/investments, as well as the value of your dollar relative to other currencies (which has been underperforming lately, btw).

I think that it's a slippery slope. As soon as you regulate pricing by banks on their products, why not other companies too?

However, I completely disagree with any restriction on interest charges, personally. I don't think that should be legislated at all. The market should decide according to the risk associated with the loan.

 

[zDom]

If they REALLY want to "stay competitive" they should be more responsible about who they approve for credit cards instead of jacking with people by putting ridiculous fees and fines in microprinted legalese.

As it is now, those with a sense of responsibility are subsidizing the irresponsible users of this "service."

Banking in general has become really shady in the last 30 years or so. But I guess that is a different subject.