Banks Target Low-Income Consumers With Fees
From our point of view, banking fees are the worst.
But from a bank’s perspective, they’re the best.
Banking fees, which are generally relatively small amounts of money paid to use a service or product, are one of the ways banks are trying to recoup losses after legislation limited credit and debit card fees, a major source of income for many banks.
The New York Times reports that the new target for these fees is the “unbanked” or “underbanked” customer, who uses few bank services, if any at all.
Banks are not always subject to interest rates on alternative products, which they’re offering to these consumers. Products include things like a reloadable prepaid card “meant to attract the ‘growing pay-as-you-go’ customer” and payday loans, which are advances on a customer’s next paycheck. Many banks are also offering prepaid cards, which aren’t subject to the same fee restrictions as credit or debit cards.
As far as payday loans go, the problem is that banks withdraw the money owed from a customer’s checking account on the determined date, whether or not there is enough money in the account. “That can lead to overdraft and other fees that translate into an annual interest rate of more than 300%,” says the Center for Responsible Lending to The New York Times. With prepaid cards, banks are coming under fire for neglecting to declare fees upfront.
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Some regulators and advocates are worried that consumers are being offered products that may not in fact be the lowest cost and are heavily supplemented with fees, while the Consumer Financial Protection Bureau (CFPB) states that it evaluates all bank and non-bank products in terms of the risks it poses tothose consumers. “Practices that make it hard for consumers to anticipate and avoid costly fees would be cause for concern,” said Richard Cordray, the Bureau’s director.
Banking and loans are hard enough to navigate without predatory loans and products, so we have to hope that the CFPB is on it … although their proposal earlier this month to overturn the ban on exorbitant credit card fees isn’t exactly heartening.