CLEVELAND—On a rainy morning in April, Anna Proctor entered a Wal-Mart Supercenter near some of this city’s poorest areas to get $300 for urgent car repairs—money she didn’t have.
Inside, she joined a line at a Woodforest National Bank branch and intentionally overdrew her account. When her paycheck was deposited 12 days later, she said, the bank would take the borrowed sum plus a $30 fee.
“It’s cheaper than a payday loan,” said Ms. Proctor, a 35-year-old customer-service worker. If her overdraft and fee were calculated as a loan, the annual percentage-rate interest, or APR, would be over 300%. She said she overdraws “all the time.”Wal-Mart Stores Inc. is known as a low-cost retailer, but customers of some of the independent banks inside its outlets are among America’s highest payers of bank fees—a large chunk of which come from overdraft charges.
A Wall Street Journal analysis of federal filings found that the five banks with the most Wal-Mart branches, including Woodforest, ranked among the top 10 U.S. banks in fee income as a percentage of deposits in 2013. Other banks among the top 10 serve the U.S. military, as the Journal reported in a January page-one article.
Most U.S. banks earn the bulk of income through lending. Among the 6,766 banks in the Journal’s examination, just 15 had fee income higher than loan income—including the five top banks operating at Wal-Mart.
A spokeswoman for Wal-Mart said it has a “very thorough process” for vetting banks to which it leases store space, to ensure “they’re in line with Wal-Mart’s philosophy of saving customers money.” Wal-Mart has no role in the banks’ operations, she said.
Some of the leading banks at Wal-Mart pitch accounts to people who otherwise might not have access to banks, including those with bad credit histories. Woodforest’s chief executive, Robert E. Marling Jr. , said his bank provides convenient hours, free financial education and unusually forgiving account features, often for riskier customers previously shut out of the banking system. The bank lets clients overdraw, in some cases up to $500, for a fee.
Woodforest’s Mr. Marling said he is aware that some customers are using his bank’s overdraft program as a payday-lending substitute. Although “that’s not what the program was designed to do,” he said, Woodforest employees often advise customers who are short of cash to take out their entire overdraft allowance at once, incurring only one overdraft fee. “To me, that’s a very efficient way of somebody having a need and paying a fee to get it.”