Big Banks Offer Payday Loans

Yes, we know they do, but a Bloomberg story this morning caught my eye. I’ve known for quite a while that Wells Fargo and First Third Bank offered these payday-style loans, called direct deposit advances or ready advances, and also that certain bank customers get these prompts for this “service” EVERY time they go to an ATM. In fact, I know a woman who has one of these loans out from Wells Fargo pretty much at all times, except when once a year they ask her to clear it, at which point she goes to another payday lender to pay it off.

Still, Carter Dougherty’s story today added something I didn’t know, namely that so many people are finally interested in this.  The attorney general of North Carolina has asked the lenders to explain why the loans do not violate North Carolina’s famously successful state interest rate cap. A private lawsuit filed in U.S. District Court in Ohio claims that Fifth Third Bank deceived customers about the true costs of the loans.  Both the FDIC and the CFPB have taken notice of the loans and are investigating the practices. Enjoy the full story here.

Comments

[Payday loan]

Many people who use it are low-income people with few assets because these people are least able to secure normal, lower-interest-rate forms of credit. Since payday lending operations charge higher interest-rates than traditional banks and less commonly encourage savings or asset accumulation, they have the effect of depleting the assets of low-income communities

[UK Pay Day Loan]

Price controls, whether in credit, or any other market place, always fail. Merchants don’t “get less expensive” when these ideas come around, they close. When payday lenders close, consumers are left with dangerous/unregulated alternatives. For once, it would be nice to see a writer think a bit more about why payday lenders are licensed, regulated, and around. People need a licensed/regulated way to get short term cash in a bind.

[Kauko Meriluoto]

That is really a good opportunity for all those payday loaner.In Finland many of banks offer payday loan which is really helpful financially for those people even the interest is something really quite high.

[BleacherViews]

With banks joining the competition on payday loans, the ultimate winners are the borrowers. Eventually the interest rates will go down to manageable levels when competition heats up between traditional payday loan lenders and banks.

I like to deal with banks if they can also come up with the same easy to approve and almost no requirement type of arrangement.