Watchdog Group Raises Alarm Over ‘Payday Loans’ at Mainstream Banks
Common Dreams - Increasingly, mainstream banks are offering products similar to payday loans — short-term, high-interest loans secured by a pending paycheck — according to a consumer group that called on the Office of the Comptroller of the Currency to stop the practice.
Banks including Wells Fargo and U.S. Bank are giving customers advances on their paychecks, typically for a fee of $10 per $100 borrowed, which translates to an annual percentage rate of 120 percent or higher, if repaid in under one month, according to a report by the Center for Responsible Lending.
“These products ensure that many borrowers will end up trapped in cycles of debt,” the report stated. “Unless the OCC 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.” Read more.