Putting a big hurt on big banks for charging big interest rates

Mike & Friends Blog

Brenda Procter

Brenda Procter is a founding member of GRO Grass Roots Organizing and helps Missourians with financial planning and literacy

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November 16th, 2011 5:24 PM

Putting a big hurt on big banks for charging big interest rates

By Brenda Procter

I can still remember where I was when I saw my first payday loan advertisement.

It was 19 years ago, and I had just started a new job with University of Missouri. I was leafing through an adbook for U of M students when I saw the ad for loans at 391 percent interest.

I thought it had to be a joke, or at least a typo. I ran upstairs to talk with one of my professor friends and said, “Can you help me? This can’t be right. This would be highway robbery. They can’t charge 391%, can they?”

We ran the math and checked the law books, and scratched our heads. Apparently, they can!

Over the years since, I have worked with victim after victim of the payday industry, watching as the annual percentage rate of interest on payday loans has actually risen to as high as 445% in our state of Missouri.

The economic crisis has thrown more people into the arms of the payday loan firms. And it seems like Wall Street is betting against an economic recovery by investing in these firms. While a few states have been able to offer solutions to the payday problem in the form of increased regulation, the newest development of giant national banks entering the area of payday more directly threatens what little progress we’ve made so far.

National People’s Action is demanding that big banks like Bank of America stop financing these predators. There’s a great video explaining the issue, and then people can call the CEO’s office to demand that Bank of America wash their hands of this dirty business: Payday Action

Bear in mind that Big Banks themselves borrow from the Federal Reserve at less than 1% interest. Then they finance the payday lenders who rip off people who are most vulnerable (a fourth of payday loans went to people who get Social Security benefits). As an activist who has been fighting for payday loan reform in Missouri for 19 years, I have a problem with that!

Since the Big Banks have federal charters, they can easily step in to fill the void where 17 states have managed to eliminate payday lending in hard-fought battles over the past 20 years.

When regulators won’t or can’t end Big Banks’ opportunistic usurious practices, how do we fight back? The answer is this: we need to strike directly at the Big Banks themselves.

Last week angry consumers and local governments, as part of a New Bottom Line campaign, moved nearly $50 million from Bank of America and other Big Banks to local credit unions or regional banks. Like the old joke says—it’s a good start. We won’t rest until $1 billion is withdrawn from Bank of America, Wells Fargo, JPMorgan Chase and other Wall Street banks.

The people’s movement is gaining steam, and the Big Banks are scared. They should be, because people power is hurting their bottom line. Let’s show the Big Banks that the people do indeed have a New Bottom Line. What is it? PEOPLE OVER PROFIT!

Go to the New Bottom Line and join the campaign, join the movement today and move your money, too.