4 ms·

"Banks earned origination fees of 5% on loans of up to $350,000; 3% on loans between $350,000 and $2 million; and 1% on loans between $2 million and $10 million

"Banks earned origination fees of 5% on loans of up to $350,000; 3% on loans between $350,000 and $2 million; and 1% on loans between $2 million and $10 million. That means they earned $17,500 for processing a $350,000 loan, compared with $100,000 for a $10 million loan." This seems ludicrously high for what is effectively clerical work -- checking some boxes, ensuring a company meets various criteria -- and money distribution. I get that smaller orgs are likely harder to check out (less income history, poorer quality financial records), but is the $350,000th dollar really 200 basis points more effort for a bank than the $350,001st? It's not as if they're being compensated for risk-taking. It's not on the bank balance sheet; this is government money. They're getting 5% just for doling it out. Unreal.

Mandatum 6y ago
This is MasterCard and VISA processing fees at scale. When you own the highways, you set the toll. Don't like it? Vote for someone who wants to change it.
- noad 6y ago
  We would have to live in a democracy or some sort of representative republic for that to be an effective plan, but we live in a corporate oligarchy instead.
- ajsharp 6y ago
  1. No it isn't. Credit card fees are far lower than this. https://www08.wellsfargomedia.com/assets/pdf/small-business/merchant/merchant-passthrough-fees.pdf https://www08.wellsfargomedia.com/assets/pdf/small-business/... 2. The "don't like it / go vote" argument is lazy, and again, really doesn't apply here.
  - labawi 6y ago
    I presume you quoted a part of the end-to-end fees. A random link[1] suggests about 3% effective rate for USA. I think in EU fees are legislatively capped at 2% or so. > In general, merchant processors will likely offer you an effective rate somewhere between 2.9% to 3.3%. You can try to negotiate that down, especially if you have high sales volume. [1] https://fitsmallbusiness.com/credit-card-processing-fees-2/ https://fitsmallbusiness.com/credit-card-processing-fees-2/
    - ajsharp 6y ago
      Yes, effective processing fees are consistently around 2.9%. The previous comment was basically saying, "hey! whaddya expect! credit card companies do it, so why not!?" My point is that, actually, no, they don't really. The visa+MC per transaction fees are actually quite low, unless I'm reading that wrong. Again, this is a complete sidebar to the actual point, which is that banks are just rent-seeking because they can on these loans.

Mandatum 6y ago

This is MasterCard and VISA processing fees at scale. When you own the highways, you set the toll. Don't like it? Vote for someone who wants to change it.

noad 6y ago
We would have to live in a democracy or some sort of representative republic for that to be an effective plan, but we live in a corporate oligarchy instead.
ajsharp 6y ago
1. No it isn't. Credit card fees are far lower than this. https://www08.wellsfargomedia.com/assets/pdf/small-business/merchant/merchant-passthrough-fees.pdf https://www08.wellsfargomedia.com/assets/pdf/small-business/... 2. The "don't like it / go vote" argument is lazy, and again, really doesn't apply here.
- labawi 6y ago
  I presume you quoted a part of the end-to-end fees. A random link[1] suggests about 3% effective rate for USA. I think in EU fees are legislatively capped at 2% or so. > In general, merchant processors will likely offer you an effective rate somewhere between 2.9% to 3.3%. You can try to negotiate that down, especially if you have high sales volume. [1] https://fitsmallbusiness.com/credit-card-processing-fees-2/ https://fitsmallbusiness.com/credit-card-processing-fees-2/
  - ajsharp 6y ago
    Yes, effective processing fees are consistently around 2.9%. The previous comment was basically saying, "hey! whaddya expect! credit card companies do it, so why not!?" My point is that, actually, no, they don't really. The visa+MC per transaction fees are actually quite low, unless I'm reading that wrong. Again, this is a complete sidebar to the actual point, which is that banks are just rent-seeking because they can on these loans.