Consumer watchdogs are calling on regulators to stop mainstream banks like Wells Fargo from offering customers payday-style loans that they say trap borrowers in long-term debt.
Once confined to the shady storefronts of payday loan shops, advertisements for short-term loans with triple-digit interest rates have made their way onto the websites of banks like Wells Fargo and U.S. Bank.
Wells Fargo's Direct Deposit Advance Service gives customers advances on their paychecks, typically for a fee of $10 per $100 borrowed or an annual percentage rate of 120 percent or higher.
According to a report by The Center for Responsible Lending:
"Because the entire loan must be repaid in short order, borrowers are likely to have difficulty both retiring the loan and meeting their other obligations. As a result, these borrowers--like the typical customer of payday loan stores--will likely take out a series of back-to-back loans, staying indebted for a significant portion of the year."
The Center's report concludes: "Unless the Office of the Comptroller of the Currency 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."
The Huffington Post Investigative Fund is also covering the new trend.
I work for a payday lender and the customers that walk through my doors don't have any other options. In this tough economy, they can't ask a family member to borrow money because they are in the same boat. Most have no or limited credit cards because of the credit crunch we are seeing from the banks.
Taking away this option doesn't take away the need. If payday lenders didn't exist, you would see more internet lending, which is really unregulated and more shady things than that.
In addition, payday lenders employee many people who pay taxes, spend their money in your communities at the businesses you work at. Payday lending companies also pay taxes and actually do a lot to give back to the communities they reside in.
The problem in general with lending and borrowing is that as long as consumers keep buying and spending without any means of paying it back banks will keep looking to take these sucker's money. I am not saying I support banks, not the case at all. What I am saying is that there is a lot of regulation, that I agree with by the way, that I think is wasted because as Americans we are just stupid and don't know how to keep it in our pants. That's for all things by the way.
If you are responsible, you use the money to pay for what you need, and you act as if that money that will be deducted from your account is already gone, then I don't see how this is any different, yes I know the 120% interest is ridiculous but at the same time what else in this world is fair, than a short term business loan used to cover business expenses.
stop the loan sharks!
re-instate Glass-Steagall!
seize foreclosed homes and give them to those in need! empty homes while their are homeless people is a slap in the face to our dignity and humanity.
Since we aren't getting any banking reform, we need another run on the banks.
Just for conversation's sake, what do you believe a reasonable interest rate would be and what about for penalties for missed payments? If someone is ok with 8-10%, and minimal penalties, then so be itm but too many people on here have been calling for no interest at all.
In Mexico in the mid-'90s Wall Street engineered a currency coup that tripled the debt owed by small businesses and family farms and also allowed for them to be massively ratejacked on top of it. Mexicans consequently formed the "el Barzon" movement and pushed back Wall Street and deposed their ruling party of 60+ years. In this country YouTube phenom Ann Minch has already declared the debtors' revolt and begun going after them http://www.revoltstartsnow.com
If you've been pushed under, you can read every other page of my book for free: http://www.scribd.com/doc/25443175/Debt-Hope-Down-and-Dirty-Survival-Strategies-Evaluation-Version-Complete
But as more people scrounge about for a bit of cash to throw at their obligations, it is inevitable that the middle class folks will be going for payday loans in ever-increasing numbers. When these folks have been gouged to a point of unrecignizability, perhaps somebody might do something-- or perhaps not, as per credit card debt. But even if Congress elects to act, by then, tens of millions of dollars, if not billions, will have gone to the banksters, as per usual.