Continued reporting on the payday loan industry by New York Times reporter Jessica Silver-Greenberg:
“JPMorgan, the nation’s largest bank by assets, will give customers whose bank accounts are tapped by the online payday lenders more power to halt withdrawals and close their accounts.”
“Under changes to be unveiled on Wednesday, JPMorgan will also limit the fees it charges customers when the withdrawals set off penalties for returned payments or insufficient funds.”
“JPMorgan said that the bank will charge only one returned item fee per lender in a 30-day period when customers do not have enough money in their accounts to cover the withdrawals.”
No doubt, there are still some “bad players” in our industry. But the days of automatic roll-overs, multiple ACH’s resulting in excessive consumer bank fees… are coming to an end and the smart guys know it.
Forward thinking, long-term “players” in the payday loan space have understood the necessity of embracing best practices, strong branding, acceptance of compliance and disclosure, and great customer service as basic requirements for long-term profitability in the AFS (Alternative Financial Services) space!
The payday loan product is evolving. Millions of consumers use them – or some form of AFS product – world wide. The payday loan industry is maturing and iterating. “Bad guys” will be pushed aside while responsible Lenders will profit handsomely.
Ultimately, consumers of AFS products will decide who the winners and losers are, not the regulators or the banks. Jer – Trihouse
Link to the Jessica Silver-Greenberg piece.
Link to The New York Times piece.
Carl, Sounds like this could be considered discrimination to me that Chase closed your account w/ no REAL explanation, unless they have a disclosure that says they have the right to, at there discression.
I believe the real issue is that the banks are not getting their ODP fees as often as they would like. Consumers have chosen the better deal of $200.00 for a fee of $35.00, over multiple ODP charges. The banks are trying to demonize the PDL industry because if we didn’t exist they would collect more ODP fees. New Peoples Bank in Virginia refuses to hold the accounts of payday lenders. The way I see it, that’s just fine, I’m sure my new bank enjoys counting my money just as much as I do.
You’re absolutely correct, Brandy. Chase, Wells Fargo, UBS and others offer their customers competing products. However, don’t forget that the banks are able to get $$ from the Federal Reserve (currently at less than 1%) and provides payday loan lenders a line of credit at prime+ an additional 3-5 pts. Banks have it “both ways.”
But, no worries, we are a very smart bunch :o)
Jer – Trihouse
I found that story very interesting. I had a business account at Chase simply because so many of my customers banked there and because it was a hop, skip, and a jump across the parking lot from my store if I ran out of cash during the day and needed to replenish my cash drawer quickly. I parked between 5K and 15K there at all times on average. After about 9 months of banking there I received a letter from Chase informing me they were closing my account because they have a policy of not doing business with payday loan companies. When I called them to question if the letter I received was valid, I asked them why they didn’t want to do business with cash advance stores. They told me that it was because they deemed it too risky. When I asked them what they found “risky” about a legitimate, licensed, business parking modestly large sums of money in their bank, they didn’t have an answer. Still don’t know what’s risky about holding deposits for a cash advance store in their bank. They sent me a check for the balance of the account and closed it for no reason. Odd …
Carl, as mentioned above, Chase offers their customers a competing payday loan product. It’s $10/$100 loaned. Chase customers must have direct deposit of their payroll proceeds into their Chase bank account. So… what’s the risk to Chase? Zip! And you want to talk about “rollovers?” Where’s Chase’s disclosures to their customers for this product? Can you guess the APR which the bank fails to reveal? But alas, we’ll beat them. AFS entrepreneurs are too fast and too furious.
You guys are right. Those of us who are in the payday loan business long term play by the rules and prosper. It just doesn’t make sense to abuse our customers. Even the banks are beginning to understand this :o)