To hear the big banks talk, you’d think they’re going out of business. Shareholders are growing frustrated and frankly, the government either can’t or won’t regulate them. One thing’s for sure: they’re making money, despite their declarations of too many regulations and too much oversight.
In a recent New York Times post, some the sneaky tactics some banks are stooping to in order to bring in profits were uncovered. Some banks are blatant in their efforts – such as the entrance into the controversial payday advance dynamics.
Still, others are quietly going about stacking fees on top of fees onto their customers’ accounts. And the worst part is they’re targeting those with low income or those they never would have considered due to their credit risks. After all, more Americans these days can no longer consider traditional bank products an option due to lingering credit problems over the past several years.
As mentioned, payday loans are becoming part of what many banks are proffering customers. Some, including Regions Financial and even Wells Fargo, are bringing in those consumers whose only options are prepaid debit cards and the incredibly risky payday loans. And they’re piling on the fees so that they’re covering their self-serving bases.
The question is, why do they all seem to be focusing on the same avenues? That answer is simple: the payday loans and prepaid debit cards weren’t included in the Dodd Frank reform act. They were never part of the massive financial overhaul and new regulations. In other words, banks are still playing by their own rules.
The Consumer Knows
In the New York Times piece, one consumer was interviewed:
David Wegner makes about $1,200 a month and is looking for a checking account. He ends up at U.S. Bank, where he is offered all sorts of financial products geared toward low-income consumers. The branch offered him prepaid cards, check cashing and short-term loan options. He said that he felt he was being treated like a second-tier consumer.
The fact is, those with multiple accounts, one or two mortgages, hefty savings and credit card debt are far more preferable to the banks than consumers who are just looking for a way to manage their weekly paychecks. And they know it, which makes “big banks” look as though they have no true sense of what the average American consumer truly needs.
Regulations
Both the CARD Act and the Durbin Amendment have built in assurances to consumers that their banks will no longer be able to gouge them with ridiculous fees. Because checking accounts are rarely profitable for banks, they had always offset those less than ideal returns with outrageous fee structures. Now that those are out, the banks are kicking some consumers to the wayside or they’re focusing their attention on those areas in the financial sector that weren’t affected by the regulations.
This means all those consumers who thought big banks were inviting them in with no ulterior motives are suddenly aware that they weren’t doing it with a goal of fixing the nation’s financial sector in good faith, but rather, to further divide the so-called classes. The “unbanked” and “underbanked” say they can’t afford bank fees. They are turning instead to things like prepaid debit cards, which, by the way, the Federal Reserve says account for the fastest-growing non-cash method of payment.
Unfortunately, those prepaid cards can also be laced with an alarming amount of fees and a lot less protection than a standard debit card. And the cycle continues. No one wins, unless you’re a big bank, of course.
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