Justin Sullivan/Getty Images NEW YORK — JPMorgan Chase said Wednesday that it will take steps to protect its customers from fees and other charges that payday lenders may slap on them.
The bank said it will limit the fees that customers are charged when they overdraft their accounts to make payments to payday lenders.
It will also “enhance communication and require additional training” for employees, to make it easier for customers to stop payments. The bank will also make it easier for customers to close their accounts even when there are pending charges, including payday lender payments.
Payday lenders are a controversial sliver of the financial system. They offer short-term loans, usually targeting the cash-strapped poor. They have high interest rates, making it hard for customers to repay the loans, and the spiral worsens when the payday lenders charge extra fees.
JPMorgan Chase & Co. (JPM) and other mainstream banks don’t make so-called payday loans. But they do allow the payday lenders access to their customers. The New York Times reported last month that JPMorgan, Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) allow payday lenders to automatically withdraw money from customers’ accounts, even in states where payday lending is banned. In some cases, the Times reported, the banks allow lenders to tap checking accounts even after the customers have begged for a reprieve.
Ryan McInerney, the bank’s head of consumer banking, said in a statement that the bank intended to protect customers from “unfair and aggressive collections practices.”
“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,” he said.
After the Times story last month, CEO Jamie Dimon described his reaction while speaking at the annual investor conference: “This is terrible, we’re going to fix it.”