In practice, overdrafts are the business model for these six banks and maybe more. These entities are not really banks in the traditional sense of taking deposits, making loans, and helping customers and the economy. They are a combination of payday lenders and check cashers, whose business model depends on a single product with a sky-high annual interest rate that is only paid by people who run out of money.
Bank and credit union regulators need to crack down on these institutions that are operating in a neither safe nor sound manner. They should start by putting any institution for which overdraft is more than 50 percent of their total profit under strict consent decree. If the institution cannot change their business model then their ability to maintain their charter comes into serious question.
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