Chase said Wednesday that it will only charge one “returned item fee” to customers within a 30-day period in cases where a biller makes withdrawals and triggers penalties for insufficient funds in the customer account — even if the biller tries to collect multiple times.
The nation’s biggest bank said the change targets payday lenders and others who present repeated payments to customers that “are not in the spirit of their signed agreement with the customer.”
Chase will give customers whose bank accounts are tapped by online payday lenders more power to halt withdrawals. The bank will make it easier for customers to close their accounts when there are open pending charges, including payday lender payments. These changes will become effective by the end of May.
“If we believe those pending charges are inappropriate, we won’t honor them,” Chase said.
Payday lenders have increasingly become targets of regulators and U.S. officials, including the Consumer Financial Protection Bureau.
Federal and state officials are looking at the role big U.S. banks are playing in Internet-based payday lending in some states and remote foreign locales.
Payday loans are banned in 15 states. But a growing number of the lenders have set up online lending sites in states where payday loans are not banned, or foreign locations such as Belize, Malta and the West Indies, to evade U.S. statewide caps on interest rates.
The CFPB has new authority to change the rules over these short-term loans, often administered by storefront businesses and often carrying substantial fees that can equate to a 400 percent APR (annual percentage rate), or higher.
Chase said it is working to identify potential misuse of the Automated Clearing House (ACH) system – including misuse on the part of payday lenders or other companies – and report such practices to the National Automated Clearing House Association (NACHA).
ACH is the network for financial transactions in the United States, enabling the processing of vendor payments, direct deposits and consumer payments.
“Some customers agree to allow payday lenders or other billers to draw funds directly from their accounts, but they may not know some of the aggressive practices that can follow,” said said Ryan McInerney, CEO of Consumer Banking at Chase. “Those practices include repeated attempts for payment that can result in multiple returned items. We don’t believe these practices are appropriate, and are making these changes to help protect customers from unfair and aggressive collections practices.”
Chase said it will work with NACHA to try to strengthen their own policies to disallow excessive presentments.
Chase also said that it “has an existing policy to always follow a customer’s instructions to stop a payment. We plan to enhance communication and require additional training regarding that policy.”