This is a story I heard recently from the New Economy Project, an organization Ford supports through our work on financial justice. It’s about a client who called their financial justice hotline. Carla (not her real name) is an African American woman who lives in Brooklyn and earns $35,000 a year. Struggling to pay bills, she took out payday loans that she saw advertised on the Internet. Payday loans, which carry interest rates of several hundred percent APR, are illegal in New York State. But this is not a story of predatory lenders—it’s the story of a major mainstream national bank, where Carla had a checking account.
Here’s what happened: Attempting to collect on the illegal loans, the lenders tried to debit funds from her checking account. When the debit came back marked "insufficient funds", they pinged her account again—and again and again and again. Each attempt triggered an “insufficient funds” response and the bank followed that by charging Carla a total of $1,100 in overdraft fees. Carla asked the bank to stop debiting her account, but the bank refused (which is illegal) and they also refused to close the account—in violation of their own rules. Instead, the bank called her relentlessly to collect the fees.
None of this surprised me. Unfortunately, I’m all too familiar with predatory lending, illegal payday loans, overdraft fees, and abusive debt collections. Frankly, I’ve heard even worse stories, ones that end in bankruptcy and foreclosure.
But Carla’s story struck me for a different reason. The day before I heard it, I had a conversation with my bank—which happens to be the same bank in Carla’s story. Distracted by the holidays and end-of-the-year workload, I had missed my December credit card payment. When I called customer service, the agent said—literally before I even asked—“I see you were charged a late fee. I can waive that for you.” I decided to push it and asked: “Can you waive the interest charges too?” She said, “Sure.” Just like that.
So why the difference? Carla and I are two customers of the same bank. One of us gets treated like a person of value, a person the company wants to keep happy, even to the point of foregoing earned income. The other is someone from whom they want to extract as much profit as they can squeeze, even to the point of breaking the law. So what gives here? Is it my account balance? My credit score? My zip code? Could it have something to do with my age or race?
I understand the challenges of making money off low-balance accounts, or underwriting loans for people with poor credit histories. Much of Ford’s grant making focuses on identifying win-win financial products to solve those challenges. But something else is going on when an institution divides its customers into those it wants to cultivate and those it wants to exploit. And that something is at the heart of what I think financial justice is all about.
In the video below, we explain how the foundation is working to expand low-income families’ access to responsible, affordable financial services.