Bank Notes: Green Dot, Chase, Payday in California

Green Dot is still doesn’t own Bonneville Bancorp. In February 2010 (16 months ago), Green Dot agreed to buy Bonneville Bancorp for $15.7 million. Bonneville is a very small bank in Provo, Utah. Green Dot is buying the bank with cash. There was some initial upheaval about the transaction (from me) that this was a shadow transaction that allowed Wal-Mart to buy a charter. Steve Streit settled those concerns through a very direct outreach to advocates. Some advocates took the step of sending a letter to the Federal Reserve which rescinded their initial protest against the acquisition. Comments closed last summer, but the Federal Reserve still has not given its ok for the deal to go through. In the meantime, Green Dot and Bonneville are working together. Bonneville is the issuing bank for cards managed by Green Dot on behalf of the US Treasury’s pilot program to deliver tax refunds to low-income consumers through debit cards.

JP Morgan Chase Changes Fee Policy: Earlier this year, a 47-year old Chicagoan pointed out a flaw in how Chase charged fees for one of its checking accounts. Chase’s stated policy was that it added a $12 fee to accounts that did not meet a balance minimum or that didn’t have at least one  direct deposit of $500. Turns out that many recipients of government benefits get several direct deposits which amount to more than $500 every month, but are delivered in smaller sums. This man was getting disability and Social Security – each for more than $400 – but still paying the $12. Two local non-profits took his case to Chase, to the media, and to the Office of the Comptroller of the Currency. Last week, Chase agreed to change their terms. It wasn’t a slam dunk. Some of their staff argued that it was a classic take-it-or-leave-it proposition. Some said that Durbin made them do it. Never mind that take-it-or-leave fails to shore up integrity, or that the Durbin Amendment isn’t yet in effect – they wanted to move on. Luckily, higher-ups saw the light.

Fewer payday loan stores, more payday loans: California released a new study of payday lending in the Golden State last month. The report, which is rare for its ability to present a market-wide analysis of payday lending,  says a few interesting things.

• transaction amounts are essentially flat since 2008.
• fewer licenses.
• on average, customers keep the loans for 17 days.
• charge-off rate is less than 2.5 percent. This is very telling, because it undermines one of the main rationales for the high cost of these loans. Most credit card programs report charges of more than 5 percent. In the last few years, some have experienced charge-offs of as high as 7.5 percent. Payday loan shops don’t have that problem. Whatever they are doing, their collection efforts are much more successful. This undermines what is essential justification as risked-based pricing: stores say that they have to charge some much because the loans are so risky.
• In 2009, payday stores in California made 930,000 loans (approximately). In 2008, they made fewer than 680,000. Yikes.