Other High Cost Credit Products

Overdraft Loans

An overdraft loan is a transaction that your bank pays when you have insufficient funds in your account to cover a payment. Banks typically charge $35 per overdraft, which can be triggered by debit card purchases, ATM withdrawals, checks, or other payments from your bank account. Some banks charge a second fee if not repaid within a few days. Banks collect payment by deducting the overdraft amount and fees from the next deposit into your account. Overdrafts are the most expensive bank credit.

  • CFA's 2012 Survey of 14 Largest Banks' Overdraft Loan Fees and Terms, 06/07/12. (PDF)
  • CFA Survey of Big Bank Overdraft Fees and Terms, 08/03/11. (PDF)
  • Get the Facts About Overdrafts and Fees Brochure, 06/29/10. (PDF)
  • Consumer Groups Submit Comments to the OCC Urging Stricter Overdraft Guidance, 10/15/10. (PDF)
  • Consumer Groups Submit Comments to the FDIC on Overdraft Guidance, 09/27/10. (PDF)
  • Consumer Groups Submit Comments to the OTS on Overdraft Guidance, 06/28/10. (PDF)
  • CFA and CRL Urge the Senate Banking Committee to Pass the FAIR Overdraft Coverage Act of 2009, S 1799, 02/05/10. (PDF)
  • CFA and CRL Urge the House Financial Services Committee to Pass the Overdraft Protection Act of 2009, HR 3904, 02/05/10. (PDF)

For more information, see CFA’s complete listings on bank overdraft loans. 

Tax Refund Anticipation Loans (RALs)

RALs are extremely high-cost bank loans sold by tax preparers and secured by the taxpayer’s expected tax refund – loans that last about 7-14 days until the actual IRS refund repays the loan. RALs cost 50 to 500% APR when all loan fees are included. Some tax preparers also charge a separate fee, often called an “administrative” or “application” fee, in addition to the RAL bank’s fees. Tax preparers and their bank partners also offer an “instant” same day RAL for an extra $20 to $39. RALs are a declining product due to action by bank regulators and the IRS.

  • Something Old, Something New In Tax-Time Financial Products: Refund Anticipation Checks and the Next Wave of Quickie Tax Loans, 02/28/13. (PDF)
  • Consumer Rental-Purchase Agreement Act Is Unfair To Rent-to-Own Consumers, 06/29/12. (PDF)
  • Consumer Groups Praise FDIC Settlement to Stop RALs, 12/09/11. (PDF)
  • Consumer Advocates Applaud H&R Block Decision to Forego RALs, 09/14/11. (PDF)
  • Consumer Advocates: FDIC Action Shows RALs are Unsafe and Unsound, 05/09/11. (PDF)
  • End In Sight For Quickie Tax Loans: Latest NCLC/CFA Report Documents Twilight of the Refund Anticipation Loan, 02/28/11. (PDF)
  • End of the Rapid Rip-Off: The NCLC/CFA 2011 Refund Anticipation Loan Report, 02/28/11. (PDF)
  • Advocates Applaud Treasury Pilot Program to Speed Tax Refunds to Consumers with No Bank Account, 1/13/11. (PDF)
  • Major Changes for Tax Refund Loans: Fewer Loans Available, But More Pricey, 1/6/11. (PDF)
  • Consumer Advocates Applaud End of IRS-Provided Service to Refund Anticipation Lenders, 08/05/10. (PDF) 
  • CFA and NCLC Call on Bank Regulator to Enforce Rules for Quickie Tax Refund Loans, 2/8/10. (PDF)
  • Consumer Groups Urge Bank Regulators to Address Refund Anticipation Loans, 10/13/10. (PDF)

For more information, see CFA’s complete listings on refund anticipation loans and tax preparation issues. 

Car Title Loans

A car title loan is a short-term cash loan where the car title is used as collateral. A typical car title loan costs 300% APR, must be paid in one month, and is made for much less than the value of the car. Title loans are typically made without regard to borrowers’ ability to repay. Borrowers risk repossession if unable to repay at the end of the month.

  • Driven to Disaster: Car-Title Lending and It's Impact on Consumers, 02/28/2013. (PDF)
  • Driven into Debt: CFA Car Title Loan Store and Online Survey, 11/17/05. (PDF)
  • Car Title Lending: Driving Borrowers to Financial Ruin, 04/17/05. (PDF)    

For more information, see CFA’s complete listings on payday and car title loan issues.

Check Cashing

Check cashers sell basic financial transaction services, such as check cashing, money orders, money transmittal, or prepaid debit cards. Many check cashers also make payday loans in states that authorize that product. Check cashers provide these services in exchange for often high fees.

  • Comments to Treasury on Proposed Rule to Mandate Electronic Deposit for All Federal Benefits, 08/16/10. (PDF)
  • Comments to Treasury on Direct Deposit Proposed Rules Regarding SS and SSI Payments, 07/13/10. (PDF) 
  • Testimony of Travis Plunkett before the Senate Commerce Committee on Consumer Protection and the Credit Crisis, 02/26/09. (PDF)
  • Consumers Pay Steep Premium to "Bank" at Check Cashing Outlets, 11/16/06. (PDF)

For more information, see CFA’s complete listings on check cashing issues.

Prepaid Cards

Prepaid debit cards, often called stored value cards, are a payment method used by unbanked and underbanked consumers to make transactions. Funds are loaded onto the card and then spent when consumers swipe the cards at retailers or withdraw cash via ATMs.  Prepaid cards can be useful to consumers but often come with steep fees and are not clearly protected by the federal laws that apply to debit and credit cards. 

  • Banking Regulator Slams Urban Trust Bank, Issuer of Prepaid Card Payday Loans (PDF)
  • Prepaid Cards: Second-Tier Bank Account Substitutes, CU/CFA/NCLC Report. (PDF)  
  • Consumer Groups Urge Federal Reserve to Clarify Regulation E to Include Pooled Accounts for Prepaid Cards, 02/17/10. (PDF)
  • Comments to Treasury on Direct Deposit Proposed Rules Regarding SS and SSI Payments, 07/13/10. (PDF)

For more information, see CFA’s complete listings on Electronic Payments.