Big Banks Finance Payday Lenders: You Knew that but did you Know some also Make payday loans?
This video is totally worth you 2 minutes. It describes big banks in rather unflattering terms (as parasites, for example) but the main thing I got out of it is that big banks finance payday lenders. Yes, it is true that the same banks that received TARP bailout money are funding payday lenders. The payday lenders include Advance America, Cash America and ACE Cash Express, which allow customers to borrow against future paychecks, and which charge an average interest rate of 455 percent on top of fees of $15-18 per $100 loaned. These lenders depend on the big banks' financing for their business. Moreover, Wells Fargo, Fifth Third Bank, and U.S. Bank, all make their own payday loans too.Talk about double dipping!
1. An estimated 120 million payday loans are issued annually in the US worth a total value of $42 Billion.
2. The average effective interest rate on a payday loan is 455% (APR). For a loan of $300, a typical borrower pays on average $775, with $475 going to pay interest and fees over an average borrowing cycle.
3. There are some 17 major payday lending companies (both public and privately-held) that operate approximately half of the nation’s total of 22,000 payday lending outlets.
4. Major banks provide over $1.5 Billion in credit available to fund major payday lending companies.
5. The major banks funding payday lending include Wells Fargo, Bank of America, US Bank, JP Morgan Bank, and National City (PNC Financial Services Group).
6. All together, the major banks directly finance the loans and operations of (at minimum) 38% of the entire payday lending industry, based on store locations.
7. The major banks indirectly fund approximately 450,000 payday loans per year totaling $16.4 Billion in short-term payday loans.
8. Wells Fargo is a major financier of payday lending and is involved with financing companies that operate one third (32%) of the entire payday lending industry, based on store locations.
9. All of these above mentioned banks received TARP bailout funds in 2008-09 and have benefited from accessing capital at exceptionally low interest rates from the Federal Reserve.
10. Major banks access credit from the Federal Reserve at 0.5% or less, these banks extend an estimated $1.5 Billion annually to eight major payday lending companies, who in turn use this credit to issue millions of payday loans to consumers every year at average rates of 400% APR.