JPMorgan Chase vows to fix payday lending practices
Jamie Dimon, managing director of JPMorgan Chase, on Tuesday promised to change the way the bank deals with internet payday lenders who automatically withdraw payments from borrowers’ checking accounts.
At an investor meeting on Tuesday, Mr Dimon called the practice, which was the subject of an article in the New York Times on Sunday, “terrible.” He said JPMorgan is looking into the matter and will make changes.
While JPMorgan Chase doesn’t make the loans directly, the bank, along with other giants like Bank of America and Wells Fargo, allow online payday lenders to deduct payments from customers’ checking accounts, even within 15 States where loans are completely prohibited. . Withdrawals sometimes continue even after customers begged banks to stop lenders from operating their accounts.
Banks are a critical link for payday lenders, who are increasingly moving online, to escape state-wide interest rate caps. Loans can carry annual interest rates above 500%. Without access to customers’ checking accounts, lenders, according to state and federal authorities, would not be as easily able to extend loans to residents of states where high-interest payday loans are prohibited.
Lawmakers have also addressed the issue. In July, Senator Jeff Merkley, Democrat of Oregon, introduced a bill that would restrict payday lenders by forcing them to follow the laws of the states where the borrower is located, rather than where the lender is located. . Another crucial aspect of the bill, pending in Congress, is a provision to make it easier for borrowers to stop automatic withdrawals.
For payday loan customers, many of whom carry a glut of overdue bills, automatic withdrawals sometimes cause a wave of fees.
According to a report released this month by the Pew Charitable Trusts, about 27% of payday loan borrowers say the loans have caused them to overdraw their accounts.
In the Times article on Sunday, two clients of JPMorgan Chase explained their difficulties in trying to persuade the bank to stop automatic withdrawals.
Ivy Brodsky, a Brooklyn customer, was billed $ 1,523 in fees by Chase after six Internet lenders attempted to withdraw money from her account 55 times in a single month. Ms Brodsky believed withdrawals would stop after going to her branch in Chase in March to close the account.
Subrina Baptiste, an educational assistant in Brooklyn, said the overdraft fees Chase charged were eating into her child support income. Ms Baptiste said she begged Chase to stop automatic withdrawals on loans she got in 2011.
Under New York law, loans with interest rates over 500% are illegal.
Ms Baptiste and Ms Brodsky both sued Chase in federal court in New York last year. JPMorgan Chase said in a statement Tuesday that it was “in discussions with these customers to resolve their issues” and added that the bank had apologized “for the problems they were having.”
JPMorgan officials “are thoroughly reviewing all of our policies related to these issues and are planning to make significant changes,” the statement said.
A spokeswoman for the American Bankers Association did not immediately comment.