In her latest column, Michelle Singeltary of the Washington Post writes about a new initiative encouraging Americans to be thrifty and save.

Note that one of the recomendations listed in her column is to “Encourage financial institutions to locate in low- to moderate-income neighborhoods and provide low-interest consumer loans. For example, in Appleton, Wis., the Prospera Credit Union has teamed up with Goodwill Industries of North Central Wisconsin to create GoodMoney, where consumers can get short-term loans much cheaper than they can get from a payday lender.”

Payday Pundit wants to point out that the Goodwill/Prospera credit union ( non-profit, tax-expempt) charge $9.90 per $100 borrowed (252% APR) for their “Good Money” payday loan.  And this is only to break even.  

Even the Goodwill payday loan alternative could not be offered under the rate caps being proposed in states like Ohio. 

Washington Post columnist Nancy Trejos is skeptical.   From her column today which discusses the recent Federal Reserve proposal to crack down on “deceptive” practices:

“The OTS {Office of Thrift Supervision} and Fed proposal show that these agencies recognize that abusive overdraft loans are a significant problem,” said Eric Halperin, DC director of the Center for Responsible Lending. “However, they would continue to allow banks to enroll customers, who never signed up for it, into the most expensive credit program the bank offers.”

They also urged the agencies to consider banning overdraft fees caused by check holds resulting from a bank’s policy to delay the availability of deposited funds. “These rules should also recognize that it is an unfair practice for a bank to charge an overdraft fee or a bounced check fee for a problem caused by the bank’s decision to place a hold on the consumer’s check deposit,” said Gail Hillebrand, financial services campaign manager of Consumers Union.

The Payday Pundit has been making the point over and over again the payday lending customers are frequently trying to avoid bounced check fees and overdraft protection costs. 

The Feds are serious.  Apparently, big announcements will be made today regarding new rules for credit card companies to end deceptive practices.  The Washington Post is playing it big, making it the top story of the day.  From the piece:

The proposed regulations, which could be finalized by year’s end, would label as “unfair or deceptive” practices that consumers have long complained about. That includes charging interest on debt that has been repaid and assessing late fees when consumers are not given a reasonable amount of time to make a payment. When different interest rates apply to different balances on one card, companies would be prohibited from applying a payment first to the balance with the lowest rate.

“It’s stronger than what has been issued in the past,” said William Ruberry, a spokesman for the Office of Thrift Supervision, which has joined the Fed and the National Credit Union Administration in backing the proposals. “What they proposed is a significant set of rules governing credit card practices and overdraft protection.”

 

The Alexandria, VA city council wants to impose a steep new tax on payday lenders according to this Washington Post article.   Advance America, the nation’s largest payday lending company is threatening to sue the city if it takes this step.  From the article:

Under the Alexandria proposal, payday and car-title lenders would face a business license tax of 58 cents for each $100 in gross receipts, up from 35 cents for each $100 of gross receipts, which is the general rate for financial services firms. The tax would generate an estimated $13,000 annually, which the city wants to devote to consumer financial education.

“I think it is a good symbolic gesture,” said Alexandria council member Rob Krupicka (D), but he said he is worried about the potential cost of litigation by payday lenders. “I don’t want to go down the path where we are paying more in legal fees than we are generating in revenue,” he said.

A new GAO report coming out on Monday details rising bank fees and lack of transparency in fee disclosure.  The report says overdraft protection fees increased 11% between 2000-2007.    Excepts from Sunday’s Washington Post story on the report:

“Banks are failing to provide consumers with information about fees on savings and checking accounts even though federal rules require such disclosures.”

“The GAO report says the percentage of income at banks and thrifts derived from    “noninterest sources,” which include fees, rose to 27 percent in 2006 from 24 percent in 2000. Increased consumer use of electronic payments, as well as increased marketing of automatic overdraft protection programs, are likely contributing to the trend, the report says.”   

In comparison, members of CFSA, the national trade association of payday lenders, are required to display their fees on poster-size displays in all story locations.