A sample text widget

Etiam pulvinar consectetur dolor sed malesuada. Ut convallis euismod dolor nec pretium. Nunc ut tristique massa.

Nam sodales mi vitae dolor ullamcorper et vulputate enim accumsan. Morbi orci magna, tincidunt vitae molestie nec, molestie at mi. Nulla nulla lorem, suscipit in posuere in, interdum non magna.

Banks criticized for moving into payday loans – FierceFinance

Traditionally, banks and credit unions have looked down with disdain at payday lenders, considering them little more than shady operators preying on the unbanked.

But in this era of severe revenue deprivation, the business model started looking a lot better. In the wake of the Durbin Amendment and the financial crisis, mainstream banks entered this market with products that they sought to differentiate. They certainly do not use the term payday loans, preferring direct-deposit loans or advance loan. Other more marketable names include “Early Access” or “Ready Advance.” But the idea is the same — they charge fat fees for relatively small loans. If you work the fees out in terms of net interest, you end up in the realm of usury.

JPMorgan Chase (NYSE:JPM) was hit hard for its willingness to aid payday lenders by allowing them to withdraw payments from accounts directly and to charge fees when the withdrawals left accounts overdrawn. It recently announced it would reform its policies. Bank of America (NYSE:BAC) and other banks may be forced to follow suit.

For some perspective on this issue, consider the recent report from the Center for Responsible Lending, which said some of the interest rates amount to 300 percent on an annualized basis.

The Washington Post notes that, “Critics say the structure of advance-deposit loans promotes a cycle of debt. Account holders typically pay up to $10 for every $100 borrowed, with the understanding that the loan will be repaid with their next direct deposit. If the deposited funds are not enough to cover the loan, the bank takes whatever money comes in, triggering overdraft fees and additional interest.”

Banks that offer such loans include Wells Fargo, U.S. Bancorp, Regions Bank, Fifth Third Bank, Guaranty Bank and Bank of Oklahoma. In the end, banks will have to work hard to satisfy regulators and portray the product as benign and even as a helpful service for people in a bind. The problem is that as payday lenders step up their lobbying activity, the banks could get lumped in with them, which isn’t necessarily ideal. They need to distinguish themselves in readily identifiable ways, which might not be simple.

Of course, the CFPB and other regulators are already taking a look.

For more:
– here’s the article

Related articles:
Banks ripped over payday loans
Banks to backtrack on payday loan withdrawals


Road To Ruin: Online Lenders Fight Regulation

Image hqdefault.jpg

Payday loan offices have been sprouting up across the country for decades. In these hard times, more people than ever are using payday loans to keep bill collectors at bay. Quick money, at interest rates of around 500% or more, for people with bad credit has been praised by some as a lifeline for the poor, but condemned by others as a trap to keep families in debt. Recently some states have passed laws limiting interest rates, but there is one marketplace that knows no borders — the Internet. ANP visited a conference where online payday-lending lobbyists urged congress to reject reform, and then traveled to a small town near the Virginia-North Carolina border to learn about the experiences of a man who googled “bad credit loans” and found himself in more trouble than he bargained for. […]