One day during this past year I paid some small contribution on behalf of a local attorney, who said hed make sure and send me a reimbursement check for the $20. I said, Woah, now. This was a loan, and its been a few days. You now owe me $100. He smiled and said, Theres a term for that: usury, and you can get into pretty big trouble by doing it. So I went home and looked it up; realized this is intimately related with how payday loan places make money, sidestepping laws against maximum interest rates. I guess they get away with it because they call them late fees, he told me with a characteristic nervous giggle you encounter when a officer of a court jokes about crimes going unpunished because of side agendas and word games. Lets say you overdraft your account by $100 and the bank charges you a $30 overdraft fee. Thats 30%. Oh, what the heck... lets annualize it. If you were charged $30/day for one year on $100, that would be a loan at 10,950%. A pretty uncommon rate of return even on Wall Street. In fact, both 30% and 10,950% are above the maximum rates and you are committing a crime against the State of Texas if you charge interest at these rates. It appears that overdraft fees/NSF fees (XYZ,123 fees) are exempt from these usury regs that cause such a nuisance (i.e. prison time) if certain guidelines are followed: The establishment of non-interest fees, their amounts, and the method of calculating them are business decisions to be made by each bank, in its discretion, according to sound banking judgment and safe and sound principles .... with some guidelines you need to meet: you need to factor in cost you incur; deterrence of misuse by your customers; enhancement of the competitive condition of the bank in accordance with the banks business plan and marketing strategy; maintenance of the safety and soundness of the institution.
Posted on: Thu, 11 Dec 2014 10:46:07 +0000
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