Ending Overdraft Fees
Plus, A Holiday Warning on Payday Loans
As Capital One announced it is ending overdraft fees, the Consumer Bureau indicated it may take regulatory action to ensure other banks follow suit. At the same time, consumer advocates issued a call on large banks - Bank of America, Wells Fargo, and JPMorgan Chase - to voluntarily end the practice.
Advocates at the National Consumer Law Center (NCLC) applauded an announcement by Capital One that the bank will eliminate overdraft fees. NCLC further issued a call for other banks to follow suit and called on the Consumer Financial Protection Bureau (CFPB) to issue rules that would end overdraft fees.
“Capital One’s complete elimination of all overdraft and NSF fees is a game changer that should set the standard for the entire banking industry and encourage the CFPB to stop overdraft fees from being used as a high-cost form of credit that can reach or exceed the cost of triple-digit payday loans,” said Lauren Saunders, associate director of the National Consumer Law Center. “Capital One is the first top-10 bank, the first with a real branch network, and the first with significant overdraft revenue to make the hard choice to eliminate overdraft and NSF fees that harm the most vulnerable consumers and push them out of the banking system.”
Sharon McCutcheon via Unsplash
Meanwhile, consumer advocacy group DebtHammer issued a survey and a warning about using payday loans to handle Holiday expenses.
A survey conducted by DebtHammer finds that 90% of payday loan borrowers regret taking out their loan. That may not be surprising considering that interest rates can be in excess of 400% and it often takes five months or more to pay off a single loan.
Roughly 80% of those surveyed said that their payday loan left them in a worse position than they were in before they took out the loan. That’s because it generally takes borrowers roughly five months to pay off the loans, and by then they’ve paid an average of $520 in interest and fees on top of the original loan amount.
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Bipartisan Legislation Would Cap Payday Loan Rates