Wednesday, April 07, 2010
Having been banned by the federal government from partnering with payday lenders, some large national banks are now directly making these kinds of high-interest loans to consumers—and avoiding restrictions that limit how much they can charge.
This problem was profiled in a report by the Center for Responsible Lending, which is calling upon the Office of the Comptroller of the Currency (OCC), the regulator of national banks, to impose new rules affecting these institutions’ ability to offer payday loans.
Banks such as Wells Fargo and U.S. Bank are providing customers with advances on their paychecks that can come with fees consuming as much as 10% of the advance. The interest rates can amount to an annual percentage rate of 120% or higher, according to the Center’s report.
Whereas smaller payday-loan lenders are restricted by state rules from charging triple-digit interest rates, banks like Wells Fargo and U.S. Bank are allowed to do so because they are overseen by the OCC.
“These products ensure that many borrowers will end up trapped in cycles of debt,” the report stated. “Unless the OCC and other bank regulators take action with regard to bank payday loans, these products will likely proliferate throughout the banking industry as financial institutions look for new sources of fee income.”
-Noel Brinkerhoff
Watchdog Group Raises Alarm Over ‘Payday Loans’ at Mainstream Banks (by Katherine Reynolds Lewis, Washington Independent)
Mainstream Banks Making Payday Loans (Center for Responsible Lending) (pdf)
The Payday Lender Senator: Corker of Tennessee (by Noel Brinkerhoff, AllGov)
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