Some Big Banks Offer Payday-Like Loans
Some large banks are offering short-term loans akin to those offered by payday lenders, says a report from the Center for Responsible Lending , a nonprofit group.
Payday loans are short-term advances of relatively small amounts, often with hefty fees, that are repaid when the borrower’s paycheck arrives. Consumer advocates say the loans are extremely expensive compared with other forms of credit, like credit cards, and can often lead borrowers into a debt spiral they can’t escape. The new Consumer Financial Protection Bureau recently convened a public forum to gather information about payday lending by both banks and nonbanks.
Concern about payday loans has previously focused on storefront payday lenders where, according to the responsible lending center, fees can translate into annual interest rates of more than 400 percent . But the center’s report looks at four big banks (Wells Fargo, U.S. Bank, Fifth Third and Regions) that also offer advances to customers who have their paycheck, or their benefits check, directly deposited into their checking accounts. More banks appear to be interested in offering the service, according to the report from the center, based in Durham, N.C.
The advances can be as large as $500, for which the bank charges a fee — typically, $10 for each $100 borrowed. When the next scheduled direct deposit arrives, the bank deducts the advance, plus the associated fee. Usually, the advance must be repaid within 30 to 35 days. (In some cases, customers can pay back over a longer period of time).
The banks say the funds are meant to be used as a short-term solution to an emergency cash crunch, rather than a long-term way of managing your money. So what’s the problem?
Consumer advocates say the loans are costly and encourage users to overspend. The average annual percentage rate for the bank advances — assuming a fee of $10 per $100, for a typical loan outstanding for 10 days — is 365 percent, the center’s report says.
payday lenders nc - News
Smith's office has been involved in efforts to eliminate payday lending in North Carolina and prevent mortgage foreclosures. "For a decade, Joe has served North Carolina as a staunch defender of consumer rights and a firm but fair regulator of banks
GARNER, NC (WTVD) -- Since 2006, it has been illegal to operate a payday loan businesses in North Carolina. However, years later, companies are still taking on customers. Now, a Triangle couple is in financial trouble over it.
By ANN CARRNS Some large banks are offering short-term loans akin to those offered by payday lenders, says a report from the Center for Responsible Lending, a nonprofit group. Payday loans are short-term advances of relatively small amounts,
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The war against payday lending is not over. It has moved to another battlefield.More than a decade after North Carolina enacted tough legislation against predatory payday lending practices — effectively booting such lenders from the state — the more
They Learned Hard Way; Payday Loans Are Illegal In NC | News
It is difficult to enforce the law against companies that operate over the internet
It is illegal to operate a payday loan businesses in North Carolina. But companies still take on customers. Now, a Triangle couple has been hurt financially. When things got financially tough for Donna Seese and her husband, they surfed the internet and found “advancemetoday.com”.
Basics
“We were looking for basic necessities,” said Donna. “You know gas money, food money.” Donna said she told the advancemetoday rep she only needed $300. “What they charge is 30 percent per hundred dollars. So in reality, the total balance due would be $390,” said Donna. “So, what’s going to happen is, you’re going to see a $90 debit come out of your account on every paycheck until the loan is paid off. And I thought that sounded fair.”
Interest
Every two weeks, advancemetoday took $90 dollars out of Donna’s bank account. When the time came for the fourth $90 to be taken out, Donna thought she was close to paying off the loan, but she learned differently when she talked to an advancemetoday rep. “He said ‘the $90 payments have all gone to interest,’” recalled Donna. “And I said, ‘Excuse me? Can you please explain that again?’” What Donna never realized was that each $90 payment every two weeks never went to her original $300 loan. Instead she was charged interest of $90 every two weeks until she repaid the 300 in full. When Donna complained to advancemetoday, they debited the entire 390 from her account to close out her loan. In all, Donna paid over $660 for a $300 loan.
That hurts
“It’s definitely hurt us, because in the first place we were in a bad position,” said Donna. “This puts us in a much worse position. I don’t want to see more victims. I don’t want to see anyone else go through what I’ve gone through because it’s impacted us greatly.” The one bit of good news for Donna is that she did dispute the last charge of $390 with her bank, and for now that money has been put back into her account.
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