Banks such as Citigroup, Bank of America, U.S. Bancorp and Wells Fargo, which have received billions of dollars of taxpayers’ money, are “tightening the screws” on the very people who bailed them out. Since the Troubled Asset Relief Program (“TARP”) began, banks have increased charges on a wide range of routine transactions, hiked rates on credit cards and continued making loans criticized by consumer groups as predatory, report David Enrich, Marshall Eckblad and Maurice Tamman of the Wall Street Journal, in a April 13, 2009 article entitled “Bailed-Out Banks Face Probe Over Fee Hikes.” Congress is investigating.
Last week, Bank of America, which got $45 billion in TARP money, informed some customers that interest rates on their credit cards will nearly double to 14%, and is imposing fees of at least $10 on a wide range of credit card transactions, according to the article. Likewise, Citigroup, which got $50 billion in TARP money, sent fliers to customers saying, “You could get $5,000 today,” but did not mention that the loans often carry annual interest rates of 30%. The U.S. government may soon own as much as 36% of Citigroup’s stock.
U.S. Bancorp and Wells Fargo offer “checking account advance” loans (notoriously predatory payday loans?) that allow customers with direct-deposit accounts to access funds before they are credited to the account ? at an annual interest rate charge of about 120%, according to the article. The banks say they are just satisfying customers’ needs for “emergency credit” and the cost is really low, since the “emergency” loans are usually paid back within weeks. Excuse me, but that sounds almost too miraculous be true.
Last year banks and savings institutions collected $39.5 billion in deposit account charges, while fees related to such transactions as ATM usage and balance transfers accounted for 25% of the industry’s total revenue, according to the Federal Deposit Insurance Corp.
The government has demanded that TARP recipients account for what they are doing with the taxpayers’ money. The bailout money is supposed to stimulate lending, but that does not seem to be happening. Overall loan volume at 470 banks that received TARP money was actually down 1% from the quarter ended September 30, according to the article.
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