Predatory Lending Practices are Back As Banks Bite the Hands That Feed Them

If you are like me, trying to comprehend the logic behind the current bank bailouts and the billions of taxpayer dollars being infused into the financial sector is becoming harder, not easier, to understand. For instance, Bank of America (BofA) just reported receiving $20 billion dollars in bailout money as well as loan loss commitments of another $97 billion from the federal government. Yet with BofA taking billions of unearned dollars, what can their customers expect in return? Not a thank you, as one might expect, but instead a slap in the face.

This became more evident on March 10^th, 2009 when BofA CEO Vikram Pandit said he expected BofA to turn a profit in Q109. Again, you can count me among the ranks of the confused as turning a profit this quickly just doesn't seem to fit into the equation considering BofA was just bailed out just a few months before. Rather it looks like BofA is taking out a cash advance using government monies as a Visa card and then telling its shareholders BofA just received a pay raise. 

This is only one of the interesting and questionable uses of bailout funds by banks. Another involves JPMorgan Chase admitting in October 2008 that it would not use the bailout funds to make loans like anticipated but instead would use the monies to purchase other banks. Already BofA used part of its bailout to increase its stake of a bank in China while at the same time cutting off funding for companies

So what else can customers expect? 10 percent of BofA customers can expect their credit card rates to rise though BofA isn't the only bailout recipient to announce such confiscation of their customer's income. Citigroup, and JPMorgan Chase have also made such rate increase announcements. Other banks have announced other forms of fee increases as well with Wells Fargo announcing increases in late and cash advance fees while Chase is introducing a $120 yearly charge on low interest credit cards.

These mounting fees and rates have caught the eye of the federal government. Already a federal committee that oversees the bank bailout program announced it is investigating  rising rates, fees and continued predatory lending practices of those banks that have received bailout funds. 

As the government probes these financial institutions and consumers continue to raise their voice in opposition to government funding both sides of banks' bottom lines through bailouts and fee increases, it stands to reason that government intervention will continue to rise for all organizations. But as is the case with any investigation, in order for companies to exonerate themselves, it is best to have supporting evidence ready.

When civil litigation is anticipated, presenting documentation such as e-mails in accordance with the Federal Rules of Civil Procedure (FRCP) is now a key factor to ensuring success during litigation. Using technologies such as Estorian's LookingGlass to retain, search and present e-mails needed in an investigation allows a company to properly respond to allegations of misconduct such as those faced by the banks.

As recent history shows, banks continue to act as though they have learned nothing from the current crisis.  Select banks continue to press for public money and guarantees for assets in which they have speculated on, all the while using tax payer bailout dollars for ventures that have had nothing to do with lending. Worse yet, taxpayers have to worry about expanded predatory lending practices from the same banks that their tax dollars are helping to keep afloat. 

Banks such as BofA, JPMorgan Chase, Citigroup, and Wells Fargo are now literally biting the hand that feeds them by rapidly and aggressively expanding the fees and rates charged to customers that are expected to foot the bill for their bailouts. The bailout oversight committee is rightly taking the steps to investigate these practices, but, for the foreseeable future, taxpayers will continue to fund multiple revenue streams to banks even as they claim a gimmicky profits such as Bank of America is doing.