Chase Makes Changes to Protect Customers from Payday Lenders
JPMorgan Chase announced that it will take action to protect its customers from payday lenders.
Account holders will now have more power to stop withdrawals and close their accounts. Chase will limit fees that it charges customers for withdrawals from payday lenders due to returned payments or insufficient funds. The bank will charge only one returned item fee per lender during a 30-day period, if the customer does not have enough money in their account to cover the withdrawals.
Chase will also provide training to their employees so that stop-payment requests are honored.
The changes go into effect by the end of May and could save customers hundreds of dollars in fees. Chase does not make the loans, but it currently allows the lenders to automatically withdraw payments from borrowers’ bank accounts.
Payday loans carry annual interest that can be over 500 percent. These laws are banned in some states, but payday lenders are now relocating off-shore and online, and they get around regulations when they have access to bank accounts.
Most people who have a payday loan can’t afford to repay it–only 14 percent of borrowers can afford enough out of their monthly budgets to repay an average payday loan according to a study by Pew Charitable Trust. Previous Pew research shows the average payday loan is $375. Americans spend $7.4 billion per year on the loans, including an average of $520 in interest per borrower.