Do you trust your bank?

VIDEO: "Five shiny marketing tactics that banks use to trick you."

Repost: Banks quietly finding ways to charge more

Here is another article about the banks' approach to customer service in these difficult economic times:

From the Vancouver Sun: Banks quietly finding ways to charge more

If you think the global tightening of credit hasn't impacted you in any direct way, you might want to check your credit-card statements. Mine has quietly gone from a 26-day grace period to 21 days.

The interest rate on outstanding balances and cash advances is one per cent higher than last year (despite a significantly lower prime rate); there's now a $2 fee for cash advances; and the balances from current and previous statements must be paid in full by the due date to avoid interest charges.

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TD Canada Trust, for example, advised customers it would begin charging a $35 "inactivity fee" as of April 30 on those who hadn't accessed their unsecured lines of credit in the previous year.

The interest rate on lines of credit also was going up.

In other words, you paid more whether you borrowed or not.

Banks Still Learning How to Treat a Loyal Customer

We already know that the current credit crunch has lead banks to become incredibly tight with their money, refusing to lend when our recovery from this mess depends upon it. An article in today's Toronto Star shows that not only are they not lending new money, but they are also putting the screws to longtime customers. The article chronicles the experience of Marvin Zuker, a provincial judge in Ontario for the past 30 years and a BMO customer for the same length of time. Despite his history with the bank, he recently had his account frozen and started receiving calls from an outside collections agency because he chose to use his overdraft for 6 months.

In good times and in bad, there is never an excuse for poor customer service and for not recognizing the value of longtime customers. One way that 310-LOAN has maintained its standing as one of Canada's leading payday loan providers is by making sure its customers don't feel like they are dealing with a bank. To get an idea of how 310-LOAN customers feel about the company's level of service, here are a few of the comments from customers, provided through 310-LOAN's Facebook page:

i have had nothing but the greatest of service from 310-Loan. Thank you for making it easy to get and to pay for a payday loan
-Troy S. (Calgary)

great service , good communication, and cool payment method and speedy!!
-Roberta B. (Winnipeg)

310 is the best out their!! thank you 310 loan
-Nicole M. (Saint John)

yes its nice and kewl to have a company like 310 i'm very grateful to u guys thx so much for making everything so easy
-Ricardo D. (Vancouver)

Yes, good & fast service, without the hassle of dealing with the bank, thanks 310-loan!
-Diane G.

I am happy with your service. Your customer reps are very friendly. When I have a problem with my account, they contacted me and discuss options with me. They deal with problem professionally and with respect. Thank you 310-loan.
-Daisy L.

I am very happy with your service; 310-loan is efficient, fast and effective, and meets all my needs. Thank you for being great professionals!
-Lorraine P. (Toronto)

More Talk About Payday Loans vs. Overdraft in U.S.

An article that appeared in the Houston Chronicle over the weekend points out that many Americans don't understand the financial benefits of choosing a payday loan instead of bank overdraft for small amounts of credit:

Debt concepts a challenge for many in U.S.:

"According to a financial literacy survey by the Center for Economic and Entrepreneurial Literacy, which advocates personal finance education, just a quarter of adults knew that overdrawing their checking account (bouncing a check) for a quick $100 was more expensive than a payday loan, credit card advance or emergency wire transfer. More than half said they thought a payday loan would be pricier."

If you are considering between a payday loan, bank overdraft or a cash advance on your credit card, be sure to get the full fee schedule from both your bank and your payday loan provider in order to make an informed decision. It takes a little extra time to find all of the fees, especially at the bank, but it is the only way that you can be sure you are making the most of the credit options that are available.

Here are some other posts about the costs associated with various short-term credit options:
Bank Fees Have Ohioans "longing for a payday loan"
Mainstream Lenders Cranking Up Fees
Will Credit Unions Provide a Payday Loan Alternative?
Bank Fees Make Payday Lenders Look Like a Bargain

Bank Fees Have Ohioans "longing for a payday loan"

Ohio banks and their ever rising fees have this Cleveland resident longing for the days when payday loans were available in that state: Bank fees will have you longing for a payday loan

Mainstream Lenders Cranking Up Fees

It looks like the big lenders are trying to pass the pain of the credit crunch on to consumers any way they can. There have been several articles lately about Visa's move to increase their rates and the rising cost of bank fees. Here are two:

CityNews: Visa Rates Skyrocket - Just In Time For The Holidays
"Starting next month, Visa is boosting its interest rate for customers who miss two consecutive minimum payments - ensuring those most in debt will be the hardest hit."

Wall Street Journal: Banks Boost Customer Fees to Record Highs
"Banks are responding to the troubled economy by jacking up fees on their checking accounts to record amounts."

Worth re-posting: Payday Pundit wants to shout from the rooftops…

Further to my previous post, here is a Payday Pundit post that illustrates how even award winning payday loan alternatives offered by not-for-profit agencies in the United States still amount to 252% APR:

"Even credit unions and charities could not offer payday loans under annual percentage rate caps of 24%, 28% or 36%"

Will Credit Unions ever be an option for cash advance consumers?

As Canadian Provinces work on their payday loan legislation and look at ways to implement effective consumer protection measures, it is worth reviewing the role that Credit Unions may play in providing short-term, small-sum credit to payday loan consumers.

Some voices in the debate such as Cheri DiNovo, Jerry Buckland, Chris Robinson and Acorn, while they all acknowledge that consumers need access to payday loan style credit, are adamant that if payday lenders were driven out of the market, Credit Unions would step in to fill the void. This view of the Credit Union as the saviour of credit constrained Canadians serves as the pillar upon which they build their argument for payday loan rate caps that would drive existing lenders out of business.

Brad Duguid, Liberal MPP in Ontario, recently described this as a "Pollyanna policy," that would drive payday loan customers to "underground" sources of credit. Mr. Duguid's concern has been echoed by numerous parties including the Consumer Measures Committee and Scott Hannah of Credit Counselling Canada.

Fortunately for policy makers (and payday loan consumers who may be wondering what sources of emergency credit will be available to them in the future) who are trying to reconcile these two positions, the Quebec experience provides some insight into what we might expect from Credit Unions in the absence of payday loan companies.

There are no payday lenders in Quebec as a result of the law in that Province that prohibits lenders from charging more than $1.34 for a $100 loan for 14 days, or 35% APR. If, as Cheri DiNovo and company have predicted, Credit Unions will step in to fill the void left by payday lenders, we would expect to see a robust set of short-term, small sum credit products offered by Credit Unions in Quebec. Readers will be interested to know that this has not been the experience in Quebec.

Here is what has happened:
One financial institution, Desjardins Financial, launched a product called micro-loans that was targeted at previously unbanked individuals. It was launched in 2001 and by 2006 there were 245 branches participating in the program. Over this time, they issued 1,792 loans for a total value of less than $1 million. I cannot ascertain the status of the program today as there is no reference to it on Desjardins' website.

To put this in perspective, a single Money Mart location will issue more than $2 million each year. Also, every payday loan customer must have a bank account, meaning that the only product I could dig up that is even close to a payday loan, was not even targeted at the payday loan consumer. Bottom line: Quebec's Credit Unions did not ride to the rescue of credit constrained consumers in the absence of payday loans in that Province.

One is left to wonder where payday loan consumers are going for their emergency credit in Quebec. Pawnshops are an obvious answer, but I have yet to dig up any good data on the state of the Quebec pawnshop industry. I will do some digging and try to provide some meaningful information as soon as I can. In the meantime, those advocating for Credit Unions to serve the needs of those Canadians who are currently counting on payday loan companies to get them through a tough financial spot should give some thought to where consumers will really go when they are short before payday. If Quebec is any indication, it won't be their local Credit Union.

From MotherJones Blog: Banks make payday lenders look like a bargain

As if to complement 310-LOAN's comments yesterday to the Nova Scotia Utility and Review Board, MotherJones is citing a study today about the high cost of overdraft fees from banks (thanks go to Payday Pundit for this find):

MotherJones Blog: Banks Give New Meaning to Protection Racket:
Payday loans have gotten a lot of bad press lately as state governments attempt to crack down on the 'legal loansharking' outfits that make very short term loans with interest rates going as high as 500 percent. But a new study by Marc Anthony Fusaro, a professor of economics at East Carolina University, found that the overdraft loans given by banks these days make payday lenders look like a bargain.

Hidden Consumer Loans: An Analysis of Implicit Interest Rates on Bounced Checks:
Payday lending attracts attention for its high interest rates, but bounce protection loans are much more expensive. Bounce protection is a program where consumers overdraft – write checks in excess of the checking account balance – and the bank pays the check allowing the account balance to be negative. For this service/loan, banks charge the standard non-sufficient funds (NSF) fee. When the amount borrowed is low and the time outstanding is short, the effective interest rate paid on this loan can be quite high. Using a unique data set we are able to quantify how high the interest rate is. We find that the median implicit interest paid by consumers is over 4,000%.