Bank of America and Other Megabanks Say They Want to Make Nice With Poor People: Don’t Buy It

Under increasing pressure from regulators and widely despised by the public, Bank of America now wants us to believe hat it will make nice with poor people. In a recent report in the New York Times, we learn that BofA and other giant banks are trying to launder their public images by talking about offering low-fee services to people who have been left out of the banking system. BofA has launched a banking account it claims is intended to prevent troubled customers from running up fees for overdrawing their balances…

Other banks like JPMorgan, are following suit with lower-cost prepaid debit cards, checking accounts and whatnot. As the Times points out, it’s a bit difficult to start cheering:
“It is hard not to be skeptical, particularly because the banks, most recently in the subprime housing crisis, have traditionally wrung vast profits from some of these same customers, who paid steep rates for loans and high fees on basic checking accounts.”
You can say that again.

So here’s the real deal. Under the scrutiny of regulators, these banks have gotten cautious, so they’re trotting out a couple of products that are somewhat less rapacious than their normal fare (nonsensical fees still apply, they’re just lower). We’re guessing that the minute the regulators turn the other way, many of these targeted low-income customers will find themselves hit by some unexpected fee hikes that will send them right back where they came from, the land of the unbanked.

This is not a new idea. Baradaran notes that in 1910, President William Howard Taft created a government-backed postal savings system for recent immigrants and the poor, which lasted until 1967. Unfortunately, times changed as private banks got bigger and more powerful, and the poor were pretty much thrown to the financial wolves:

“By the 1990s, there were essentially two forms of banking: regulated and insured mainstream banks to serve the needs of the wealthy and middle class, and a Wild West of unregulated payday lenders and check-cashing joints that answer the needs of the poor — at a price.”

In a world in which cash is increasingly becoming obsolete, the poor urgently need financial services. But believing that giant banks operating in oligopolistic conditions and thinking of little beyond profit maximization are the answer is nothing more than a fairy tale. One that ends badly for those who can least afford to lose…



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