A KPRC Channel 2 investigative report out of Houston details how Bank of America is manipulating “pending” deposits and debits to charge customers overdraft fees.

Shelly Fisher knew she was running low in her account when she saw a pending automatic payment to TiVo.

A $10 check cleared, leaving her with less than $5 in the bank.  She made a hefty deposit to make sure she never dipped below zero.  But Bank of America still dinged her account with a $35 overdraft fee.

What happened? Bank of America said that “pending” transaction to Tivo “could have” made Shelly’s account overdrawn if it had been processed before she made that deposit.

“So, we’re going to be charged for hypothetical situations now?” Shelly said she asked the bank employee.

Ha — Zing!  Good one, Shelly.  But to answer your question, yes — hypotheticals are the newest form of revenue for banks.  And even as the Payday Pundit types this, banks are trying to figure out a way to charge you fees for even thinking about using your own money.  It will likely be called “The Anticipatory Finance Fee.”  Even better than Shelly’s query to the bank is the American Banking Association’s response:

“The fees are very avoidable. It’s very easy to avoid overdrawing an account.”

It sure is, especially if you closely monitor your balance and be sure to make timely deposits if you’re running low… all of which Shelly Fisher did.  Maybe the banking spokesperson is referring to some of the other “easy” ways to avoid overdrawing an account… which are apparently secret.  Are we trapped in an Orwell novel?

From regular reader Jon Schultz:

I think a few essential points need to be communicated to the voters in a concise, easy-to-understand way:

1. HB545 would eliminate small, short-term loans from the marketplace by requiring that they be offered for a fraction of the cost of issuing them. The proponents of HB545 are trying to hide that fact, claiming they can be issued at a 28% APR, which they most certainly cannot.

2. These loans are the only type of loan which many people can qualify for. They help people in emergencies and also save people money on bank overdraft fees and other charges which dollar-for-dollar are much more expensive.

3. Customer satisfaction surveys around the country have shown that an overwhelming majority of borrowers consider the loans to be a useful financial service.

4. The government should protect consumers by ensuring that loans be offered in an honest, easy-to-understand way, but it should be up to consumers to decide if they wish to apply for a loan and the government should not take that choice away from them.

I know you guys know this already. Thanks for indulging my enthusiasm for this referendum

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Thousands of these are distributed every day to encourage citizens to sign the referendum petition.  Just click on the links above to open in PDF.   (If you close on the documents, it takes you away from he blog, so backspace instead. )

From the Arkansan Leader:

The 136 {Payday lending stores} still in operation include the 55 operating in defiance of Attorney General McDaniel’s order, and 81 that currently operate outside of state regulation.

McDaniel and his staff have said these 81 will face scrutiny and potential action given the Attorney General’s long-term goal that all payday lenders in Arkansas cease operations.

Women selling their eggs is the latest thing: 

 Across the country, fertility centers have also seen a surge in repeat donors and surrogates.

 A woman who passes the health and psychological screenings can get thousands of dollars in return for her donation.

“The donors will make in the area of $7,000, and the surrogates will make anywhere from $20,000 to $30,000 plus,” said Nancy Block, founder of the Center For Egg Options.

In the Valley, Dr. Bruce Shapiro at the Fertility Center of Las Vegas said compensation is closer to $3,000 to $5,000.

The Payday Pundit is anticipating  the Center for Responsible Lending finding this practice sexist, racist, and a corporate plot aimed at stealing wealth from low-income citizens.  The only claim they won’t make is that it targets seniors. 

The Nova Scotia Utility and Review Board announced the caps it was placing on fees for payday loans there.  After careful study and soliciting input from both sides of the issue, the board:

…set the maximum cost of borrowing at $31 on $100, including interest and fees. It also capped the default penalty at $40 and limited the interest rate on any outstanding balance to 60 per cent.

The review board also asked the provincial government to require companies to file yearly reports to track data on loans, including the number of defaults.  So, safeguards for consumers were put into place, future studies and monitoring of the issue were commissioned, and lenders are able to continue operating their businesses at reasonable rates.  Why can’t state legislatures in America copy this model?

This new study by the National Community Reinvestment Coalition claims minorities are at higher risk to be the recipients of high-cost mortgages and other types of loans.     To their credit, the authors didn’t make the charge that lenders “target” by race.  From the report:

Lending disparities for African-Americans and Hispanics also increased significantly as income levels increased. During 2006, middle- and upper-income (MUI) African-Americans were twice or more as likely to receive high-cost loans as MUI whites in 155 of the metro areas analyzed (71.4 percent). Furthermore, MUI Hispanics were twice or more as likely to receive high-cost loans as MUI whites in 45 of the metro areas analyzed (22.5 percent).

In comparison, while low- and moderate-income (LMI) minorities are more likely to receive high-cost loans than LMI whites, the disparity was less significant than disparities among MUI borrowers. LMI African-Americans were twice or more as likely to receive high-cost loans as LMI whites in 87 metro areas (47.3 percent). Furthermore, LMI Hispanics were twice or more as likely to receive high-cost loans as LMI whites in 8 metro areas (4.9 percent).

Advocacy group Demos released a statement yesterday endorsing the freshly introduced “Credit Card Holders Bill of Rights.”  As support for this US House bill Demos cited some interesting statistics about who credit card companies are “targeting” and how much they’re charging these customers in “penalty fees”:

Demos research shows that low-income families and households of color, primarily African Americans and Latinos, bear the brunt of the cost of credit card deregulation through excessive fees and high interest rates.

…Among cardholders who carry balances, those with household incomes below $25,000 are five times more likely than households earning over $100,000 to pay penalty interest rates higher than 20 percent.

…[O]nly seven percent of white cardholders are charges interest rates over 20 percent, but 15 percent of African-American cardholders and 13 percent of Latino cardholders pay such rates.

The Payday Pundit is glad to see Congress taking action against some real predatory lenders.

In a Miami Herald article that details the rise in “scammers targeting the financially troubled,” there is a passing swipe at payday loans that is so deft, Payday Pundit almost missed it.  Almost:

Older, younger and poor people and those with disabilities are the most affected by the scams, according to the federation’s survey.

They’re victimized most often by mortgage fraud, foreclosure scams, Internet fraud, high-interest payday loans and shoddy construction work.

Isn’t that a neat trick?  In the first sentence the reporter talks about scams affecting poor, young, and disabled people.  In the second sentence the reporter lists these scams — except one of those things is payday loans, which are legal.  Guilt by association, though, right?

No one at a CFSA member payday loan business is trying to steal a customer’s mortgage payment, steal their house, steal money through the internet, or trick them into paying for a poorly-built addition.  Payday lenders are in the legal business of offering customers short-term loans at reasonable rates.  This practice is still legal in a majority of states, including Florida.  The last time Payday Pundit checked, Miami was still part of Florida.