Coalition targets overdraft protection

FINANCE

Consumers and some consumer advocacy groups have complained for years that certain banking industry practices help boost banks' bottom lines in ways that are unfair to customers.

For example, just last week, a coalition of nonprofit consumer groups, including the Consumer Federation of America and the U.S. Public Interest Research Group, fired off letters to federal regulators complaining that proposed changes to Federal Trade Commission rules don't go far enough to protect banking customers from involuntary overdraft protection.

The groups argue that consumers would be better off if banks simply bounced checks or refused debit transactions that would overdraw customers' accounts instead of honoring the check or transaction by writing what amounts to a short-term loan at a high interest rate, payable out of the customer's next deposit, and with no notice given.

According to the groups, consumers pay at least $17.5 billion a year for these overdraft protections.

While that amount is a rough estimate, the industry provided a figure of its own for the amount it makes on some credit card practices that have been targeted for reform by the Federal Reserve.

Banking giant JPMorgan Chase & Co. sent a letter to the Fed last week opposing proposed rules that would curtail certain interest rate increases, ensure that consumers have adequate time to make payments on card balances before interest is charged, and stop lenders from allocating payments to balances with lower interest rates when the borrower has accounts with different rates.

Chase said it hired a law firm, Morrison & Foerster LLP, to poll other major banks (the company declined to say which ones or how many) about how much the proposals would cost them. The answer: at least $10.6 billion a year.

In addition, Chase said, the new rules would boost annual percentage rates to an average of 16.58 percent and prompt the industry to tighten its standards to a point that would cut new accounts by $11 billion a year and reduce total credit lines to consumers by $1.1 trillion.

So now we have some idea of just how much the lending giants are profiting by those practices, and how much they're costing consumers.

Mortgage help

A nonprofit economic development group in Orangeburg is holding a workshop this week that could be useful for people on different sides of the rising tide of mortgage foreclosures.

The Claflin University Community Development Corp. plans a workshop Thursday evening that will offer help to homeowners facing foreclosure — and to anyone who's looking to buy but may need a little assistance.

The workshop is based on two programs offered by the Neighborhood Assistance Corp. of America, a Boston-area nonprofit founded in 1994.

Under its Home Save Program, that group seeks to work with lenders to lower interest rates to levels that are affordable for struggling homeowners. And under its Best in America Purchase Program, NACA helps provide mortgage financing with no down payment, no closing costs and a fixed 30-year interest rate of 6.0 percent. It also provides counseling for prospective buyers whose finances aren't quite at a point where they qualify for a mortgage. Details are available at naca.com.

The workshop, geared toward Orangeburg County residents, is scheduled for 6 p.m. Thursday at Claflin's Grace Thomas Auditorium. More information is available at 803-535-5093.