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Fee Hikes at Bailed-Out Banks Spur Investigation

Interest rates as high as 30% raise questions about program's effectiveness

By Clay Dillow,  Newser Staff

Posted Apr 13, 2009 7:08 AM CDT
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(Newser) – Congressional overseers of the TARP program are investigating the lending practices of several of the banks they bailed out in response to complaints that the banks are raising interest rates and fees, the Wall Street Journal reports. Despite receiving billions in taxpayer dollars, Bank of America last week nearly doubled some credit card interest rates to 14%, and added fees of $10 or more on a many credit-card transactions. Citigroup is advertising loans with a 30% interest rate.

Citigroup received $50 billion in taxpayer cash while Bank of America accepted a $45 billion injection, both intended to spur consumer lending. As first-quarter results come in this week, the panel will scrutinize earnings to see how much money is returning to taxpayers via loans. Banks argue that fees for everything from ATM use to late payments are a key income source, netting $39.5 billion last year.

Neel Kashkari, acting interim assistant Treasury Secretary for financial stability. Kashkari worked on the initial TARP injections now in question for Bank of America and Citigroup.
Neel Kashkari, acting interim assistant Treasury Secretary for financial stability. Kashkari worked on the initial TARP injections now in question for Bank of America and Citigroup.   (AP Photo/Pablo Martinez Monsivais)
TARP Special Inspector General Neil Barofsky and Elizabeth Warren, chair of the Congressional Oversight Panel for the Troubled Asset Relief Program.
TARP Special Inspector General Neil Barofsky and Elizabeth Warren, chair of the Congressional Oversight Panel for the Troubled Asset Relief Program.   (AP Photo/Susan Walsh)
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The people who are subsidizing the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending.
- Elizabeth Warren, chairwoman of the Congressional Oversight Panel

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COMMENTS
Showing 3 of 3 comments
AdaptAndOvercome
Apr 13, 2009 12:13 PM CDT
How do you like that? They get bailed out by the tax payer and then they put it to the tax payer by charging them more. It's the Republican way. That's how they got in trouble and these leopards haven't changed their spots. Take.Take.Take.
northeast
Apr 13, 2009 1:16 AM CDT
When you're in financial trouble, either charge more or cut costs. They've cut employees and they're increasing their cash income...maybe that's why they're doing better than any other bank in the United States right now. It's a lesson our own government could learn...
northeast
Apr 13, 2009 1:13 AM CDT
You are aware, of course, that Bank of America has attempted to return their bailout funds? Also, the interest rate on credit cards (in the wake of consumer-protection legislation) is determined by the prime rate, which is pretty terrible right now.

How to deal with a surging credit card rate
ABC News

Fees, rates squeezing more from credit card holders
Cleveland Plain Dealer

Obama encourages taking advantage of record-low interest rates
Voice of America

 
Citigroup • Bank of America • loans • credit card • fees • consumer credit • interest rates • Elizabeth Warren

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