Today, Senate Republicans blocked a vote to confirm Richard Cordray as head of the Consumer Financial Protection Bureau. This signals a victory for big banks, the 1%, and corporate money in our political system. Cordray's confirmation would have been a threat to business as usual for the big banks because we would have a leader who could put an end to the kinds of predatory practices that drove our economy to the brink of collapse.
If any bank represents the need to have a regulator in place that protects people on consumer financial issues, it's Bank of America. Whether their $35 overdraft fees, foreclosing on more families than any other bank in the country, or a recent failed attempt to institute a $5 a month fee on debit card holders, America's bank has become a symbol for all that is wrong with the financial sector.
Now here's an abuse you may not have heard of. Bank of America provides hundreds of millions in financing to payday lenders who charge their customers annual interest rates of up to 455%. In doing so, Bank of America is supporting an industry that succeeds by trapping their customers into spiraling debt cycles. On average, a $300 payday loan actually costs the borrower over $750.
Instead of helping families build wealth, payday lending actively strips wealth away from families and communities. In a nation facing historic wealth inequality, payday lending at interest rates that sometimes reach 1000 percent is the exact kind of practice that both exploits wealth disparity and expands it. This is the top 1% profiting off the misery of the bottom 10%.
Payday lenders wouldn't be thriving without the financial backing of the mainstream banking industry. The same banks that taxpayers bailed out, including Bank of America, Wells Fargo, US Bank, and JP Morgan Chase, provide over $1.5 billion in credit that funds an estimated $15 billion in payday and cash advance loans.
As part of a strategy to clean up their reputation, Bank of America should lead an industry-wide walk away from this form of predatory lending by ending financing agreements with Advance America and MoneyTree Inc, two major payday lenders in America. Bank of America's Chief Executive Officer, Brian Moynihan faces no shortage of challenges, including preparing his bank for stress tests being implemented by the Federal Reserve. But if he is serious about shoring up his bank's reputation, he should line up some quick victories. Ending financing agreements with payday lenders is a simple decision, and something that Mr. Moynihan has complete control over. He just needs to decide he does not want his bank associated with these predatory practices and not renew financing agreements with Advance America and MoneyTree, Inc.
That's the easy part. Bank of America also needs to invest in a fair and affordable small dollar loan program. In a nation in which 46 million people are living in poverty, there is a real need for small consumer loans to help people make it through tough times. Some banks will say they can't make enough profit from an affordable small dollar loan product. Here's a novel idea - What if the banks did this because it is in the public interest? What if they expanded their purpose to speak to a bottom line that not only included profit, but also the health and well-being of families, communities, and the environment? Corporations exist because we, the public, allow them to. They are a creation of the laws of our government. And therefore we have the right to ask, even demand, that corporations serve a purpose greater than simply expanding profit. Banks are a good place to start as they are recipients of exceptional public privileges. For instance, national bank depositories, of which Bank of America is one, access loans from the Federal Reserve at interest rates of 0% or just above that. They borrow money at 0% and lend it to the public at a higher rate. This becomes particularly offensive when they then lend it to their friends in the payday loan industry, who in turn lend it to us at rates of over 400%. They should and could meet the need for affordable small dollar loans to help families make ends meet. In doing so, they would begin to demonstrate that they could act in the interest of a new, more thoughtful bottom line.
Bank of America is not the worst on this front, Wells Fargo is, financing not only more payday lenders, but offering their own customers payday loans at triple digit interest rates. And this is why Brian Moynihan should separate his bank from the pack and publicly declare that Bank of America will not finance institutions that prey on people's hardship. More than any bank in the country, Bank of America needs to find ways to rebuild its relationship with the American people. At a time when wealth inequality is at the center of the national dialogue, now is the time for Mr. Moynihan's bank to divest from industries designed to prey on families caught between a rock and a hard place. This simply means not renewing lending agreements with these predators and then investing in the creation of small dollar loan products that are fair and affordable. Bank of America can meet the real public need of helping people living check-to-check bridge the gap when emergencies arise.
At demonstrations across the country, we've heard the chants "Bank of America is Bad for America." If Mr. Moyhihan wants these chants to end, he should consider this one of the steps he takes in effort to prove this slogan is no longer true.
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The headline should read: "The Entire World Should Cut Ties to Brian Moynihan" The writer, Mr. Goehl is working on the mistaken assumption that Brian Moynihan, and people like him are somehow salvageable; they are not. They devote their entire lives to making money and ethics are not part of that life. Ethics only get in the way of their goal. Moynihan could cut ties to payday lenders, but he would still be the same man with the same lack of ethics. He, and others like him, actually believe that if they pick your pocket, are exposed, and made to stop that they are the victims and have lost something that they are entitled to. They believe that every possible revenue stream, be it illegal or unethical, is their birthright, and if cut off by law or public pressure, should be replaced by another. Brian Moynihan will never change. It's not in his DNA. He will never have an Ebenezer Scrooge epiphany. Wishing for Brian Moynihan to do the "right thing," is a waste of time, and a perfectly good, "first star I see tonight."
These sharks pay their workers horribly, the lines are long and the insult on top is the rate one pays and the abusive business practices.
The choice options can be fair.
How fair that these banks make 400% off poor people.
I whole-heartedly agree.
If the banks can't step up to do it, there are many credit unions that can be in charge of those small loans.
Kai
Now: PDLs are really not all that profitable(I've never seen the books of one, but I'm sure a lot of people just skip out on paying). The idea behind lending is reserves for loss and risk-based pricing. They're extremely highrisk. No creditcheck. Nothing known about the borrower. Really, what's to stop the borrower from closing that account.
Do they rape you with fees? Yes. Do you agree when you sign up? Yes. Are those fees disclosed? Yes. Did you ignore those fees coz you needed the money? Yes. Do those companies have much legal recourse? No(Usually based out of state or out of country. They're not going to show up) Should you have maybe looked at your other options first or maybe set aside even $5 from each pay to a savings? Yes. ($5 each pay over 5 years is $650. The average PDL gives $500. You'd have thatand not need the PDL)
As a side note: If you live in PA.(or look in your state) PA has a small loan program already in place. BetterChoice. It's a little bit more work than filling out an online application but seems to help in the end.
I have never gotten a payday loan.
I have, however, had to stand in line behind people applying and you can be sure that not only is plenty of paperwork required but so are thumbprints.
The risk is no larger than the risk in giving banks that destroyed the world's economy 0% interest loans, and the credit agencies that backed them - speaking of risk assessors.
Now, the credit agencies and how they treat the poor and middle class is a whole other article, I hope.
Dimon -Chase- was upset yesterday, and said "he didn't get " why everyone is so anti.........
Hope he reads this story. And is careful in Church/synagogue this weekend.we know what Jesus did to the money lenders...............
I get many of the so called Pre-approved credit card offers from Visa and Mastercard issuers offering 0% interest for six or nine months, but reading the fine print on the back reveals the true rapaciousness of these lenders. At the expiration of that initial period, the interest rate leaps up to 20% - 24%, rates that would put a street lender in prison on usury charges. And heaven forbid, if you become delinquent or exceed your credit limit, the rates can then soar to 30% and more.
In Colorado, there are laws that require pay day lenders to post the interest rates they charge. I happened to see one of their signs................................................. 1,064% interest.
That's not a misprint, over a THOUSAND percent interest.
Will someone please explain what usury means, because either I don't understand the meaning of the word, or the Government of the State of Colorado doesn't.