More than 700 Walmart Stores House a Bank with a Predatory Past

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by Pam Martens and Russ Martens, Wall St On Parade:

Yesterday, during a Senate Banking Committee hearing, Senator Chris Van Hollen of Maryland caught our attention when he said that there are three U.S. banks that “make 100 percent of their profits on overdraft fees.” He named the three banks as First Texas, Academy Bank and Woodforest National Bank. Van Hollen explained that most folks paying these fees are living paycheck to paycheck and many don’t even know that they’ve over-drafted their account because many banks provide no warning at the time the overdraft is occurring.

The Consumer Financial Protection Bureau (CFPB) issued a report on overdraft fees in 2017, finding the following:

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“A small group of consumers pay most of these fees. In a given year, only 30% of consumers overdraw their checking account. The 8% of consumers who overdraft more than 10 times per year pay 74% of overdraft fees. These consumers are charged $380 in overdraft fees on average annually.”

Senator Van Hollen also caught our attention when he said that one of the three banks making 100 percent of their profits from overdraft fees, Woodforest National Bank, had 12 of their branches in his state of Maryland located in local Walmart stores. We decided to check out that bank.

It turns out that the vast majority of Woodforest National Bank’s 769 branches in 17 states are in local Walmart stores – more than 700 in fact, according to information on its website. In 2020 and 2021, the bank has continued opening new branches in Walmart stores.

According to the Federal Deposit Insurance Corporation (FDIC), the 17 states Woodforest National Bank is located in are: Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia.

One of the witnesses giving testimony at yesterday’s Senate Banking hearing was the acting head of the federal regulator that supervises “national” banks, meaning those banks operating across state lines – Michael Hsu of the Office of the Comptroller of the Currency (OCC). Hsu told Van Hollen that the OCC has a review going on regarding overdraft fees.

We looked at regulatory databases for previous charges brought against Woodforest. It turns out that the OCC charged Woodforest 11 years ago with “unfair or deceptive practices” regarding its overdraft fees. The OCC forced the bank to return $32 million to customers “who were harmed by the bank’s overdraft program,” and pay a $1 million fine to the U.S. Treasury. The OCC wrote this about the conduct of the bank:

“Specifically, the bank assessed excessive amounts of overdraft fees and improperly assessed recurring fees, or ‘continuous overdraft fees’ against certain consumers. In addition, in its marketing brochures the bank emphasized the free or low cost features of certain accounts while omitting information about costly features such as overdraft protection. The bank’s marketing also suggested that certain accounts were well-suited for consumers who had previous difficulty in managing their bank accounts, while omitting information about the high-cost features of its overdraft protection.”

The OCC remains the “primary regulator” of Woodforest National Bank today according to federal records. The OCC has, apparently, placed no curbs on its ability to expand into more and more Walmart stores.

The OCC is not the only regulator to have attempted to rein in the practices of Woodforest. In 2015, the New Hampshire State Attorney General brought an action against a company affiliated with Woodforest, Merchants’ Choice Payment Solutions, for deceptive practices.

Two years later, a class action lawsuit was filed in federal district court in the Southern District of Texas: Al’s Pals’ Pet Care LLC, et al v Woodforest National Bank, et al. According to a March 2018 amended complaint in that matter, the following fraud was alleged:

“For years, Woodforest National Bank, through its credit card and debit card processing business, engaged in a scheme through which it defrauded and overbilled its customers. Woodforest’s card processing business was predominantly known as “Merchants’ Choice Payment Solutions” [MCPS]…

“Before the sale of MCPS to Paysafe, the number of shell companies held under the ‘Woodforest’ umbrella made it particularly difficult for merchants to know which parties they were interacting with. Merchants were left with no way of knowing how certain fees were distributed, thereby hindering their ability to question improper ‘junk’ fees…

“Defendants have aggressively perpetrated their schemes. Despite full knowledge of the troubling business practices at the highest levels of MCPS and Woodforest, their fraudulent and unethical practices have continued unabated even after the sale to Paysafe. Moreover, their standardized payment processing paperwork and contracts used by all agents and employees has continued to intentionally misrepresent, omit, and/or conceal key facts concerning the fees they know they will eventually charge merchants if merchants sign on the dotted line.”

The class action was settled for $15 million and given final approval by the federal district court in January of 2019.

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