Wells Fargo has the power of life and death over Jackson Hewitt. In the next few months, we’ll get the first sense of how much patience Wells has for its patient.

Wells has extended a large revolving line of credit to Jackson Hewitt. The terms are about as strict as can be.  For Jackson Hewitt, those terms are a problem, because regulatory events in recent weeks have created the grounds for Wells Fargo to declare that JTX is in “event of default” on their loan.

Last May, Jackson Hewitt and Wells re-negotiated their agreement. Jackson (more…)

Since Lehman Brothers imploded in 2008, publishers have stocked our bookstores with dramatic stories about the fall of Wall Street. Newspapers regularly report on how small businesses and home owners can get loans on Main Street. Fewer people have paid attention to what’s happening in downtrodden districts. That is, until Gary Rivlin wrote “Broke, USA.”

Broke, USA

This book tells the story of the back-and-forth battle between a spirited group of consumer advocates and the merchants of sub-prime debt. It has been waged in legislatures, in the press, and on street corners for the last twenty years. It threads are anchored in just a few epicenters. Certainly, the first would be in North Carolina, where Martin Eakes and his peers convinced the North Carolina General Assembly to outlaw payday lending. Then there are the scores of (more…)

The time for a decision on ShoreBank may be coming soon.

A few rumors are circulating that the FDIC is ready to make a decision about ShoreBank, the famous Chicago community development lender that helped to define the field of community capitalism.

ShoreBank created a model of making loans in low-and-moderate income neighborhoods in the South Side of Chicago. ShoreBank ignored many of (more…)

The Federal Housing Administration has decided to rethink how it protects itself with a new guidance last month. The new rules have implications not just for borrowers, but also for private mortgage insurance companies.

The new rules, known as the Loan Level Pricing Adjustments (LLPA – pdf here), say that most FHA borrowers will now have to pay an upfront premium of 150 basis points on the amount of their FHA loan. Subsequently, they will be expected to pay another 50 basis points each year. That second charge is paid with the monthly payment.

One analyst at a private mortgage insurance company called me to tell me how much of a difference this will make for his company. He paints a tough picture for the market in the last year: the private firms were being squeezed by the low rates at FHA and the high origination fees built in to (more…)

From a first glance, linking a savings account to a prepaid card seems like a “no-brainer.” Ah, but with a brain comes the realization that everything on these cards has an incremental cost, and the best way to make them work is to lower their ultimate cost to the consumer.

Card issuers then have a choice – offer the account and append some kind of cost on to the consumer, or make a card that is simpler and cheaper, albeit without the savings account.

Most cards out there opt for some version of the first choice. H&R Block’s Emerald Card has a savings sub-account and a stored value sub-account.  The savings account pays 5 percent interest, but users have to pay a fee to move their money back out of savings and on to the stored value side. They cannot spend from savings.  It is the same with many of the NetSpend cards.  In some instances, consumers can get 5 percent on savings, but they’ll also pay fees on the account. Unless there is more than two thousand dollars on those accounts, the interest doesn’t make up for the cost of the fees.

The debit card provides an opportunity for a savvy company to reach the un-banked. One of the chief advantages is that transactions on these cards generate interchange fees. Those fees are paid to the card issuer. In some instances, contracts held by the issuer with their prepaid partners (distributors, processors, marketers) dictate that the interchange fees will cover costs up and down the delivery platform.

The Green Dot CEO, Steve Streit, understands that savings accounts aren’t that important to the un-banked. His cards don’t have a special savings feature, because they would not be utilized. Over the course of a year, his consumers are able to save, on average, just $78.