PORTLAND, Ore. — Bank of America’s announcement that it will eliminate free checking for people who don't maintain a minimum balance has revealed a paradox: the less money a person makes, the more expensive it can be to manage their money.
This new policy will affect Oregonians, as there are about 50 Bank of America locations across the state. Aaron Klein, a fellow at the Brookings Institution, said these types of fees are among the hidden ways the U.S. banking and payment system is regressive, which exacerbates income inequality.
"The poorer you are, the more the payment system takes from you. And the wealthier you are, the more it gives to you,” Klein said. “And this is particularly true for Americans who are living paycheck to paycheck."
Klein said there are two obvious ways this plays out: The first is the credit card reward system. People paying with credit cards often get tax-free, cash-back rewards on purchases. Lower-income people, who tend to pay with cash, miss out on those perks.
Second, the U.S. payment system is slow, and a person's paycheck may not get to their bank fast enough. This frequently causes people to overdraft and can drive some to rely on payday loans.
Klein said there are some simple solutions. He called the country's slow payment system an "embarrassment," and noted that many others have real-time payment systems, including England, Mexico and Poland. Japan has had a real-time payment system since 1973.
Klein said the Federal Reserve worked quickly to implement the technology allowing consumers to deposit checks from their phones, but then dragged its feet on the system bringing that money from the bank to a specific account.
"Doing that cost lower-income, working families billions of dollars a year in late fees, overdrafts and payday loans to bridge the gap,” he said. “Policymakers need to act on simple, available technological solutions to help working families."
Klein added that banks have moved faster to implement real-time payment than the Federal Reserve. It will cost them money, but banks realize if they don't do it, someone else will. He said policymakers should also improve laws against money laundering, which make it expensive for banks to open and maintain checking accounts.
An NBC News piece on this topic, authored by Klein, is available here.
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Lawmakers in Olympia this session moved to add more protections for consumers against predatory loans.
Washington state lawmakers passed Senate Bill 6025 unanimously in both chambers, closing a loophole companies were using to evade caps on the amount of interest charged on loans.
Sam Leonard, an attorney in Seattle, said tech companies providing financial services such as loans would charter out of state banks, especially in Utah, where lenders can charge unlimited interest rates.
"These fintech lenders a lot of times will charge 150, 200% interest on relatively small dollar loans, $3,000, $5,000 and the like," Leonard explained.
Washington state has a set of protections called the Consumer Loan Act to shield people from predatory loans. Leonard said capping interest rates at the federal level would help people across the country.
However, he emphasized the bill goes a long way to increase protections for Washingtonians.
"Not a lot of states at this time have passed similar legislation," Leonard pointed out. "Washington is out in front of the curve with regard to protecting low-income Washingtonians or other Washingtonians that might enter into these predatory loan products."
Leonard added the issue with predatory loans is they keep people in continuous debt cycles.
"Loan products like these essentially strip low-income individuals' ability to improve their economic situation," Leonard noted.
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While there's snow in the immediate forecast, the spring storm season has arrived in Minnesota and state officials said with complaints related to homeowner insurance claims on the rise, it is important to monitor changes in policies.
The Minnesota Commerce Department said complaints from policyholders, largely stemming from their claims being denied, have more than doubled since 2020.
Julia Dreier, deputy commissioner of insurance for the Minnesota Department of Commerce, said under a changing climate, the nation is seeing plenty of extreme weather events resulting in wind and hail damage, and insurance companies are adjusting to what's happening.
"Insurance costs are going to increase," Dreier pointed out. "We do want to make sure that Minnesotans are prepared."
As some carriers narrow what is covered or require higher deductibles, Dreier urged consumers to carefully review their policy when it is up for renewal, to avoid surprises when they have to file a claim. The department acknowledged changes can slip under the radar when consumers rely on paperless statements sent via email, or with busy schedules preventing them from reading all the fine print in documents they receive.
The department emphasized it is a complicated process in getting complaints resolved, noting some can be partially reversed in favor of the homeowner. Dreier noted they work closely with the industry to make sure a company's actions are within the letter of the law.
"One of our jobs is to make sure that insurance companies aren't doing something unethical when they're submitting their policy forms to us and their rates to us for review," Dreier added.
The department does have a new video on its YouTube channel, which offers more details on how to better prepare yourself ahead of any future claims, including knowing whether your policy offers flood protection and assessing the value of items in your home.
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Wisconsin has announced a big development in trying to establish more digital equity around the state.
Gov. Tony Evers and the Public Service Commission say Wisconsin's blueprint for digital equity has been accepted by the National Telecommunications and Information Administration.
That means the state is eligible for up to $30 million to implement its approach over the next five years.
Martha Cranley - state director for AARP Wisconsin - called it a robust plan, noting that older populations continue to face challenges in being connected to the digital world.
"We know that at least 15% of people 50-plus in Wisconsin are not connected," said Cranley, "either because the wires simply don't come to their house, or they don't have a device, or they don't know how to use it."
Cranley said the lack of connection is especially concerning in rural areas across northern Wisconsin, where aging communities have limited resources.
Stakeholders also note an infusion of new aid is helpful with the federal government's Affordable Connectivity Program - which provides discounts on monthly internet bills for eligible households - in danger of running out of money.
Cranley said the state's plan came together following extensive public outreach, in which her organization helped convey the need for improved internet access for those 50 and older.
"They certainly heard from older people about how important this is to connect to their doctor," said Cranley, "and to connect to government services, and frankly, find employment."
Overall, Evers says the plan's federal approval means more than 410,000 homes and businesses will be better positioned to be connected to new or improved high-speed internet service.
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