Still working on an
I was at a local bank this week, depositing a check from a solvent institution but one known to have cash flow issues
it is a large west coast bank, relatively well known including for some recent financial games with the Feds.
This time, the nice lady at the counter asked me if I needed immediate access to the deposit?
Huh? Said I. Looking at the payeee - "I think the check will clear..."
Oh, it is not that, said she, it is just that some people need immediate access to their deposits, like same day, or tomorrow, and if you did we can expedite it.
Oh, that's nice, thought I, and said "no thanks, got enough balance to cover any outstanding transactions thanks, but been there..."
so, I wandered off, and suddenly though - well was prompted by my better half to think - "expedited? at what price?"
So, I checked online - there is nothing about expedited access to deposits, rather a guarantee that deposits before 4pm are available same day... or next day.
Unless: several reasons, none of which apply to me, nor, I sincerely hope, the payee.
But, there is "direct deposit advance".
Interesting:
"The Finance Charge is a one-time transaction charge and is not dependent upon the length of time the advance is outstanding. The Finance Charge is $2.00 for every $20 that is advanced, which equates to an Annual Percentage Rate (APR) of 120%."
Wow.
That's criminal.
Now, it is intended as something to be used one-off service for emergencies, clearly not something they expect some customers to use semi-regularly as they get behind on their finance.
Right.
But, this is what overdraft protection is for - and the terms to qualify to use that are similar, so why not...
oh.
The overdraft protection fees are worse, at least for small amounts.
I foresee some interesting feedback spirals in the personal banking world in the near future.
Can't get blood from stone.
Politics
Comments
I urge everyone, contact your federal Representatives and Senators and demand submission and passage of a Federal Usury law.
Posted by: Tony P | March 31, 2009 2:57 AM
That is illegal...usury,,,check cashing places, pawnshops and haji marts are all trying this now.Preying on the poor and lower class that are forced to use these avenues for transactions.
Posted by: jeff | March 31, 2009 8:50 AM
Jeff: In some states this is indeed illegal. In other states it isn't. As Tony implies, there is no federal usury law. There is a reason credit card companies choose to domicile themselves in Delaware or South Dakota: those two states do not have usury laws. Effectively, the state in which the bank is domiciled determines the applicable interest rate cap.
Also, even if it happens to be illegal in California, the bank may be able to weasel its way out of it. The more elegant solution is to have the cash advance come from a subsidiary in Delaware or South Dakota. But they may opt for the brute force method of arguing that they are a national bank and therefore state laws do not apply.
Posted by: Eric Lund | March 31, 2009 9:43 AM
These are the same terms that a payday lender would offer. Banks are now trying to cut in on this line of business by offering their own version(s) of payday "loans" - competing with Cash America and others.
This is partially a hedge against potential Congressional restriction of the overdraft "business" (overdraft fees contribute as much as 40% to a banks bottom line) and partially unbridled greed. Banks are addicted to these types of fees. You will see them resorting to more and more blatant attempts to claim a greater % your paycheck and deposit dollars for "services" that cost them literally nothing. Right now, a Bank should be honored that anyone even trusts them with their cash. These fees are audacious and unethical.
A good, ethical, well run bank would give any loyal customer with recurring deposit history access to their deposit dollars instantly.
I urge anyone using a bank that does otherwise to change to a bank that does. They may be tough to find these days - but there are always credit unions.
Posted by: Crosby Peachtree | March 31, 2009 11:26 AM
Joke heard on radio:
I went to an ATM to withdraw some money, but the Bank gave the message "Insufficient Funds".
I thought: Do they mean theirs or mine?
Posted by: toby | March 31, 2009 12:09 PM
What bank? I purposely bank with the bank our company banks with - that way, I can deposit my check and get cash back immediately, without having to wait. Once when I was with WF, they took TEN days to clear my paycheck; and my company is pretty solvent, even in these days. It just goes to show - ALWAYS read the fine print. Those litte terms of agreement pamphlets that come with your statement is the bank's way of telling you about these things - if you don't question it, your complicity in the terms is assumed.
Posted by: RW | March 31, 2009 12:35 PM
It is Wells Fargo
see https://www.wellsfargo.com/checking/dda/index
they structure it as a one time charge, but it is a service available on a monthly basis (ie get an advance to cover end of month bills each month), and they expect the money to be paid back within a month - by the incoming direct deposit for the next month; so effectively it is 10% interest for a loan of month of less, structured for small loans - less than a paycheck.
If used recurrently, which is clearly the trap, then it nets to an APR of 120%, and clearly some lawyer within WFC made them note this on their info.
Posted by: Steinn Sigurdsson | March 31, 2009 12:45 PM
If used recurrently, which is clearly the trap, then it nets to an APR of 120%
Actually, it's an APR of 120% (at minimum) even if you do only use it once. It appears to be simple interest because it's effectively a new loan every month; otherwise the APR would be much higher--compound interest would be an APR of about 214%.
But having people use it recurrently is the intent, no matter how much they pretend otherwise (wink wink, nudge nudge). Once you are in the position of needing this service, it is hard to get out. As Mr. Micawber pointed out: Annual income twenty pounds, annual expenses nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenses twenty ought and six, result misery. The typical amounts involved have gone up ~1000-fold since David Copperfield was published, but the principle remains the same.
Posted by: Eric Lund | March 31, 2009 3:26 PM
"Unless: several reasons, none of which apply to me, nor, I sincerely hope, the payee."
You, the receiver of the check, are the payee.
Posted by: Moopheus | March 31, 2009 4:30 PM
True.
Although if I wanted to quibble I could note that the payer was actually just channelling funds to me, so was also a payee...
but that wasn't what I meant and I wouldn't do that.
Posted by: Steinn Sigurdsson | March 31, 2009 4:46 PM
"Now, it is intended as something to be used one-off service for emergencies..."
This may be the general public's self-justification for the cost, but this is likely not the banks' position. I worked as a teller at a large bank just before the recession was in full swing. Their attitude was that no customer should leave without a new "product" that they didn't have before. The "ABC" rule of sales was in full effect.
Posted by: Aaron | April 1, 2009 12:39 PM
Actually, so far as I understand it, it isn't usury for them to offer you the money, only for them then to 'collect' their loan from your account when the cheque clears. So view it as free money and then take them to court when they (illegally) try to reclaim it, is what I say.*
*Provided you have lots of additional funds handy to spend on getting into a legal fight with a bank.
**Oh. Okay. Well in places where it is illegal.
Posted by: Duncan | April 1, 2009 8:56 PM