Dimon Pledges to Change JPMorgan's Practices on Payday Loans
The New York Times
By: Jessica Silver-Greenberg
February 26, 2013
Jamie Dimon, the chief executive of JPMorgan Chase, vowed on Tuesday to change how the bank deals with Internet-based payday lenders that automatically withdraw payments from borrowers' checking accounts.
At an investor meeting on Tuesday, Mr. Dimon called the practice, which was the subject of an article in The New York Times on Sunday, "terrible." He said JPMorgan was examining the issue and would make changes.
While JPMorgan Chase does not make the loans directly, the bank, along with other giants like Bank of America and Wells Fargo, enable the online payday lenders to deduct payments from customers' checking accounts, even in the 15 states where the loans are banned entirely. The withdrawals sometimes continue even after customers have pleaded with the banks to prevent the lenders from tapping their accounts.
The banks are a critical link for payday lenders, which are increasingly moving online, to evade statewide caps on interest rates. The loans can carry annual interest rates above 500 percent. Without access to customers' checking accounts, the lenders, according to state and federal authorities, would not be as easily able to make loans to residents in states where high-interest payday loans are banned.
Lawmakers have taken aim at the issue, too. In July, Senator Jeff Merkley, Democrat of Oregon, introduced a bill that would restrict the payday lenders by forcing them to follow laws in states where the borrower is located, rather than where the lender is. Another crucial aspect of the bill, which is pending in Congress, is a provision allowing borrowers to more easily stop the automatic withdrawals.
For payday loan customers, many of whom are shouldering a glut of overdue bills, the automatic withdrawals sometimes cause a wave of fees.
According to a report released this month by the Pew Charitable Trusts, an estimated 27 percent of payday loan borrowers say the loans caused them to overdraw their accounts.
In the Times article on Sunday, two JPMorgan Chase customers explained their travails in trying to persuade the bank to halt automatic withdrawals.
Ivy Brodsky, one customer in Brooklyn, was charged $1,523 in fees by Chase, after six Internet payday lenders tried to take money from her account 55 times in a single month. Ms. Brodsky thought the withdrawals would stop after she visited her Chase branch in March to close the account.
Subrina Baptiste, an educational assistant in Brooklyn, said the overdraft fees charged by Chase ate into her child-support income. Ms. Baptiste said she begged Chase to stop automatic withdrawals on loans she got in 2011.
Under New York law, the loans, which came with interest rates of more than 500 percent, are illegal.
Both Ms. Baptiste and Ms. Brodsky sued Chase in federal court in New York last year. JPMorgan Chase said in a statement on Tuesday that it was "in discussions with these customers to resolve their issues" and added that the bank apologized "to them for the problems they had."
JPMorgan officials are "taking a thorough look at all of our policies related to these issues and plan to make meaningful changes," the statement said.
A spokeswoman for the American Bankers Association did not have an immediate comment.
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