Discover more from Advocate Andy
A Loan Shark by Any Other Name
Plus, holding banks accountable for oppressive fees, fraudulent accounts
Jason Mikula at Fintech Business Weekly reports on LendUp’s latest shenanigans — and the operations of a “new” banking product by way of Kinly.
When LendUp was facing existential regulatory threats to its payday lending business, it attempted a last-ditch pivot: starting a neobank called Ahead Money.
While the company was able to get the project live, it’s unclear how many users it amassed before LendUp, as first reported by Fintech Business Weekly, quietly entered liquidation. As part of that liquidation, it appeared that LendUp sold or transferred its neobank assets, including user accounts, to Kinly (formerly known as First Boulevard and Be Tenth) — though neither representatives for LendUp/Ahead nor Kinly ever responded to inquiries confirming this to be the case.
Users of Kinly, including those transferred from Ahead Money, have been complaining on social media and in app store reviews that, while they can deposit money to Kinly, they’ve been unable to transfer money out of the app, and have faced long delays in receiving debit cards or even getting responses from Kinly’s customer service team.
This all sounds pretty unpleasant. Imagine funding an account or transferring money to an account and then NOT being able to access those funds.
Or, worse, imagine having your account MOVED to a new provider without any notice, as happened to customers of Ahead Money.
What’s happening now for customers of LendUp/Ahead/Kinly is, unfortunately, not at all uncommon as new lenders dressed in fintech packages seek to skirt state and federal banking regulations and profit from misleading consumers.
Then, there’s OppFi — a fintech that is fighting in court in California in order to continue charging triple digit interest rates on loans.
And there’s SoLo Funds — home of the 4000% interest rate.
The bottom line: The ease and convenience of fintech lending often comes at a cost that customers don’t realize until well after it’s too late.
Take caution. Remember, too, that traditional community banks and credit unions offer many mobile and app-based services and play by a strict set of rules that are designed to protect customers.
As America’s largest banks testified before committees in the U.S. House and Senate this week, a new analysis by Accountable.us notes these same banks are profiting handsomely off of overdraft fees. Additionally, the nation’s big banks are increasingly embroiled in suits over defrauding customers.
Ahead of the testimony, a new analysis from Accountable.US has found that in the first half of 2022, just three of these “mega banks” — Bank of America, Wells Fargo, and JPMorgan Chase — have together reported over $37 billion in net income while reaping $7.8 billion in revenue from service charges on consumers’ deposit accounts, including over $1.6 billion from overdraft fees. Meanwhile, these three banks have spent $25.7 billion on stock buybacks and shareholder dividends, representing 69.4% of their net income over this same period.
I’ve written before about the billions in revenue generated each year from bank overdraft fees.
Recent CFPB research showed that banks continue to rely heavily on overdraft and non-sufficient fund (NSF) fees, which cost Americans an estimated $15.5 billion in 2019.
Here’s a handy chart from earlier this year that shows bank overdraft fee policies.
In addition to last week’s hearings in Congress, the Consumer Financial Protection Bureau (CFPB) is also examining overdraft fees and working to push banks to eliminate them.
“Rather than competing on quality service and attractive interest rates, many banks have become hooked on overdraft fees to feed their profit model,” said CFPB Director Rohit Chopra. “We will be taking action to restore meaningful competition to this market.”
The Accountable.us analysis also pointed out the various fraud cases against the big banks:
Making matters worse, these three banks (Bank of America, Wells Fargo, and JPMorgan Chase) have faced at least $5.3 billion in fines and settlements since 2020, including $460.7 million in 2022 so far.
Overdraft fees charged to low-income consumers would more than cover the fraud fines paid by these banks. Which essentially means that the big banks are practicing fraud and counting on their most financially stressed customers to cover the cost of that fraud.
As Accountable further notes regarding reliance on overdraft fees:
This practice continues to especially harm low-income consumers, who are often living paycheck-to-paycheck, or those relying on the timely receipt of benefit payments. These penalties are a persistent obstacle for many to achieve economic stability in their own lives or businesses. When so many families struggle to get ahead while dealing with this needless extra financial burden, it holds back the economy for everyone.
It’s important to note, too, that banks make all sorts of claims about the benefits of overdraft fees, but the reality is, the only benefit is to the banks — and if these banks can be hundreds of millions in fraud settlements each year, they can reduce or eliminate overdraft fees and still make huge profits.
Here’s an example of a claim about fees and the reality — again, provided by Accountable:
RHETORIC: The U.S. Chamber of Commerce has argued that eliminating overdraft would “make it more difficult for consumers to manage their finances.”
Yes, that’s right, banks often order transactions in such a way as to force a customer to incur an overdraft or multiple overdrafts, thus increasing fees to the bank.
Here’s an example:
A customer has three checks or debits in the amounts of $20, $45, and $100. The customer’s account balance is $80. Rather than paying the $20 and $45 transactions and then declining or charging an overdraft fee on the $100 transaction, banks will often process the $100 transaction first, leaving the customer’s account in the negative and resulting in two additional overdraft charges.
The bottom line: Overdraft fees harm consumers and pad the accounts of already profitable banks.