The bailed-out banks have found a new way to annoy the government, according to the Congressional Oversight Panel, the body named by Congress to oversee the federal bailout. Chair of the committee and friend of the blog, Elizabeth Warren, is concerned that the same people who are subsidizing the banks are being targeted by abusive lending practices, says the Wall Street Journal
“The people who are subsidizing the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending,” Ms. Warren told the WSJ. “In a sense, we’re asking taxpayers to pay twice.”
The article called out Bank of America for raising interest rates on their credit card customers, and Citibank for offering $5,000 loans — and not disclosing in the advertising that the interest rate was (brace yourselves for this) 30% .
Citibank said that the interest rates on the loan mentioned in the article “compare competitively to similar offers in the market,” and Bank of America said that “To continue to offer competitive products and services and responsibly lend in this current environment, we must adjust our pricing.”
Meanwhile, consumer advocates, including our own Consumers Union, have been keeping an eye on Pacific Capital Bancorp, a bank that accepted TARP funds and is issuing so-called tax-refund anticipation loans. These loans can come with an interest rate that exceeds 100%.
A spokesperson for that bank said that they were not using TARP funds specifically to issue RALs, but that the funds did allow the bank to be healthy enough to lend a “variety of loans.”
Wells Fargo and U.S. Bancorp were called out for offering “checking account advance” loans that carry an interest rate of 120%. These loans allow customers to borrow against presumably forthcoming direct deposits.