Bailed-Out Banks (C, BAC, WFC, USB) Facing Probe After Raising Fees

The federal banking-bailout committee is investigating the lending practices of banks that received public funds, following complaints it received about increases in interest rates and fees.

Since the TARP was launched last year, banks have raised fees on a wide array of routine transactions, increased rates on credit cards and continued making loans criticized as predatory by consumer advocates, reported the WSJ. The TARP funds were intended to open up and increase lending and not make it more difficult for people to borrow money.

For example, just last week, Bank of America (NYSE: BAC) told some of its clientele that interest rates on their credit cards will nearly double to about 14% and BAC is now charging $10 for a wide range of credit-card transactions.

Citigroup (NYSE: C) is trying to entice consumers to borrow at a 30% annual interest rate on a $5,000 loan in advertisement it sent out last week. "

"To continue to offer competitive products and services and responsibly lend in this current environment, we must adjust our pricing," said a Bank of America spokeswoman about the company's new fees and interest rates.

Last month, a Senate committee narrowly approved a bill that would rein in many credit-card marketing and pricing policies, including ballooning interest rates.

Even regional banks who have received TARP funding are charging extreme rates to lend consumers money. U.S. Bancorp (NYSE: USB) and Wells Fargo & Co. (NYSE: WFC) offer "checking account advance" loans that allow customers with direct-deposit accounts to access funds before they are credited to a customer's account balance. The short-term loans carry annual interest rates of about 120%. Some argue that taxpayers are being charged twice, since taxpayers are also funding these companies through TARP.

The government has demanded that TARP recipients provide detailed accounts of what they're doing with taxpayer-funded capital. According to an analysis of federal data by The Journal, overall loan volume at 470 banks that got TARP capital was actually down 1% from the quarter ended September 30, compared with a 2.2% decline at banks with no capital infusion as of March 20.

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