If you thought the TBTF banks couldn’t stoop any lower, think again. If this doesn’t prove without a shadow of a doubt that the more you coddle and bailout the big banks, the more brazen, criminal and out of control they become. I guess entering the slumlord business and running the food stamp program just wasn’t good enough. In their latest scheme, we find that JP Morgan (of course), Bank of America and Wells Fargo (Uncle Warren’s pet) are at the center of what can only be called a global loan-sharking business that prays on destitute American citizens. Basically, the way the scam works is payday lenders set up shop overseas in locations such as Granada, Belize or the Isle of Man in order to avoid various state laws against payday loans. The key link in the chain are the TBTF crony banks who process the loans and facilitate the interest charges, which can be well over 500%. So what’s in it for the banks? Huge fees of course. Absolutely disgusting, but par for the course for these guys. From the New York Times:
Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.
With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.
While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.
For the banks, it can be a lucrative partnership. At first blush, processing automatic withdrawals hardly seems like a source of profit. But many customers are already on shaky financial footing. The withdrawals often set off a cascade of fees from problems like overdrafts.
Some state and federal authorities say the banks’ role in enabling the lenders has frustrated government efforts to shield people from predatory loans — an issue that gained urgency after reckless mortgage lending helped precipitate the 2008 financial crisis.
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