Posted by TechCrunch on March 06, 2018 11:59:52The world’s biggest online lender, Fidelity Investments, announced that it would stop charging its customers interest on loans that had not been paid off, but would allow them to continue paying for the loans with a “subscription” of up to 30,000 points.
This was announced during a conference call, during which the CEO of Fidelity and other executives said the move was meant to save on costs associated with collecting the unpaid balance and then paying it back.
Fidelity said it would begin issuing these subscriptions “on a rolling basis,” starting with the first payment in April 2018.
The change in policy comes as the Federal Reserve begins its “normalization” of the $3 trillion US mortgage market, where some US banks are making more money by refinancing their mortgage loans.
The Fed also announced this week that it is starting to ease some of the restrictions that banks face under the Dodd-Frank Act, which it passed in 2010.
As Fidelity noted in its statement, “Our customers are already paying off their mortgages and this change will help us reduce our costs and help us pay down debt faster.”
As we reported, the average amount of interest that Fidelity pays for these subscriptions will drop from 1.2 percent of the loan’s value to 0.5 percent, while the average monthly payment for the subscribers will go from $1,400 to $700.
As of March 12, Fiduciaries said it had nearly 2.2 million subscribers, up from 1,054,000 subscribers at the end of last year.
As the US economy begins to recover, banks may also begin to use this new revenue to invest in new investments, like mortgages.
This could boost the economy, since a lot of the money that is spent on mortgage loans in the US comes from high-cost investors.
However, there is a catch.
The payments for the subscriptions will still be made quarterly, but the interest rates that are paid on those payments will remain fixed.
The new policy will only affect the subscribers who have already made their payments and who have opted into the subscription.
The move will not affect the many other people who are already making payments on their mortgages, but will likely increase the number of people who will be forced to pay off their loans before the end, if at all.
The Fidelity spokesperson said the change will be rolled out over the next two years, with subscribers able to start receiving their payments on May 31, 2019.