{"id":515278,"date":"2010-04-05T06:00:53","date_gmt":"2010-04-05T10:00:53","guid":{"rendered":"http:\/\/washingtonindependent.com\/?p=80162"},"modified":"2010-04-05T06:00:53","modified_gmt":"2010-04-05T10:00:53","slug":"watchdog-group-raises-alarm-over-%e2%80%98payday-loans%e2%80%99-at-mainstream-banks","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/515278","title":{"rendered":"Watchdog Group Raises Alarm Over \u2018Payday Loans\u2019 at Mainstream Banks"},"content":{"rendered":"<div id=\"attachment_75473\" class=\"wp-caption alignnone\" style=\"width: 490px\"><a href=\"http:\/\/washingtonindependent.com\/wp-content\/uploads\/2010\/02\/payday.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-large wp-image-75473\" title=\"Payday\" src=\"http:\/\/washingtonindependent.com\/wp-content\/uploads\/2010\/02\/payday-480x352.jpg\" alt=\"A customer applies for a payday loan in Sacramento. (The Sacramento Bee\/ZUMA Press)\" width=\"480\" height=\"352\" \/><\/a><\/p>\n<p class=\"wp-caption-text\">A customer applies for a payday loan in Sacramento. (The Sacramento Bee\/ZUMA Press)<\/p>\n<\/div>\n<p>Increasingly, mainstream banks are offering products similar to payday  loans &#8212; short-term, high-interest loans secured by a pending paycheck  &#8212; according to a consumer group that called on the <a href=\"http:\/\/www.occ.treas.gov\/\">Office of the Comptroller of the  Currency<\/a> to stop the practice.<\/p>\n<p>Banks including <a href=\"https:\/\/www.wellsfargo.com\/\">Wells Fargo<\/a> and <a href=\"http:\/\/www.usbank.com\/\">U.S. Bank<\/a> 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 <a href=\"http:\/\/www.responsiblelending.org\/\">Center for Responsible  Lending<\/a>.<\/p>\n<p><div id=\"attachment_2754\" class=\"wp-caption alignleft\" style=\"width: 140px\"><img loading=\"lazy\" decoding=\"async\" class=\"size-thumbnail wp-image-2754\" title=\"debt\" src=\"http:\/\/www.washingtonindependent.com\/wp-content\/uploads\/2008\/08\/debt-150x150.jpg\" alt=\"Image by: Matt Mahurin\" width=\"130\" height=\"130\" \/><\/p>\n<p class=\"wp-caption-text\">Image by: Matt Mahurin<\/p>\n<\/div>\n<div class=\"floatButtons\">\n<div style=\"float: left; margin-right: 10px; margin-bottom: 10px;\"><script src=\"http:\/\/digg.com\/tools\/diggthis.js\" type=\"text\/javascript\"><\/script><\/div>\n<div style=\"float: left; margin-bottom: 10px;\"><script type=\"text\/javascript\"\n\tsrc=\"http:\/\/d.yimg.com\/ds\/badge2.js\"\n\tbadgetype=\"square\">\n\t<?php the_permalink(); ?><\/script><\/div>\n<div style=\"float: left; margin-right: 10px;\">\n\t<script type=\"text\/javascript\">\ntweetmeme_source = \"TWI_news\";\ntweetmeme_service = \"bit.ly\";\n<\/script> <script src=\"http:\/\/tweetmeme.com\/i\/scripts\/button.js\" type=\"text\/javascript\"><\/script>\n<\/div>\n<div style=\"float: left;\"><a name=\"fb_share\" type=\"box_count\" href=\"http:\/\/www.facebook.com\/sharer.php\">Share<\/a><script src=\"http:\/\/static.ak.fbcdn.net\/connect.php\/js\/FB.Share\" type=\"text\/javascript\"><\/script><\/div>\n<\/div>\n<p> &#8220;These products ensure that many borrowers will end  up trapped in cycles of debt,&#8221; the <a href=\"http:\/\/www.responsiblelending.org\/payday-lending\/policy-legislation\/regulators\/Mainstream-banks-making-payday-loans.html\">report<\/a> stated. &#8220;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.&#8221;<\/p>\n<p>In recent years, several states have  cracked down on payday lending, which typically operates out of simple  storefronts. Fifteen states and the District of Columbia prohibit  triple-digit interest rates on loans to consumers, according to the  Center. But national banks are subject to regulation by the OCC, a part  of the <a href=\"http:\/\/www.ustreas.gov\/\">U.S. Treasury Department<\/a>,  and thus evade the limits. Consumer advocates are particularly concerned  about Wells Fargo extending the reach of the products through its  recent <a href=\"http:\/\/blog.wellsfargo.com\/wachovia\/\">acquisition of  Wachovia Bank<\/a>.<\/p>\n<p>Wells Fargo defended its loan product as a  service to existing customers caught in an emergency, whose high cost is  fully disclosed and complies with state and federal law.<\/p>\n<p>&#8220;Wells  Fargo does not consider our Direct Deposit Advance Service  &#8216;exploitative&#8217; nor is it a &#8216;payday loan,&#8217;&#8221; spokeswoman Richele Messick  said in an email response to questions. &#8220;We reach out to customers at  all stages of their usage of the service, reminding them of the expense  of this product and encouraging them to seek less expensive  alternatives.&#8221;<\/p>\n<p>A U.S. Bank spokeswoman didn&#8217;t respond to  requests for comment.<\/p>\n<p>In 2000, the OCC stopped national banks  from partnering with payday lenders, the Center said, calling on the  agency to crack down on banks that are now directly making these kinds  of loans. The OCC should also gather information on bank customers&#8217;  usage of these products and the impact on minority communities, which  are disproportionately affected by payday lending, the report said.<\/p>\n<p>The  OCC doesn&#8217;t have a problem with national banks offering this type of  loan, spokesman Dean DeBuck said.<\/p>\n<p>&#8220;It&#8217;s not a payday loan. It&#8217;s  available through banks and bank branches. It&#8217;s something you don&#8217;t get  at a storefront,&#8221; DeBuck said. &#8220;This is a product that is offered to  customers and they don&#8217;t have to use it. If it works for them, fine. If  it&#8217;s not suitable for them, they can find something else.&#8221;<\/p>\n<p>Here&#8217;s  how the Wells Fargo and U.S. Bank products work, according to the  Center. A banking customer who is signed up for direct deposit of at  least $100 every 35 days may take an advance of $500 or half of the  monthly direct deposit income, whichever is less. The funds are  automatically repaid from the incoming direct deposit funds or existing  balance.<\/p>\n<p>A key problem is that the bank doesn&#8217;t evaluate the  customer&#8217;s ability to repay the loan, as it would with a mortgage or  consumer loan, Center spokeswoman Kathleen Day said.<\/p>\n<p>&#8220;It&#8217;s not a  good idea to lend money to someone that they can&#8217;t afford to repay,&#8221;  Day said. From the customer&#8217;s perspective, &#8220;it would be better to take a  $100 cash advance and pay it back over the year because you&#8217;d only be  paying a double-digit APR.&#8221;<\/p>\n<p>The OCC is primarily concerned with  the safety and soundness of national banks, which actually improves when  the banks make more money off their customers, noted David Min,  associate director for financial markets policy at the <a href=\"http:\/\/www.americanprogress.org\/\">Center for American Progress<\/a>,  a progressive think tank.<\/p>\n<p>&#8220;The prudential regulators don&#8217;t  necessary care as much if the consumers are being misled,&#8221; Min said.  &#8220;They&#8217;re not always going to be a good consumer protection regulator.&#8221;<\/p>\n<p>In a <a href=\"http:\/\/www.responsiblelending.org\/overdraft-loans\/policy-legislation\/regulators\/National-Bank-Regulator-Enabled-Overdraft-Abuses.html\">separate  report<\/a>, the Center said overdraft programs at national banks are  among the worst in the industry and called on the OCC to curb abuses.<\/p>\n<p>&#8220;Most national banks have adopted automated overdraft systems  through which the bank routinely lends accountholders the money to cover  any transaction &#8212; including those conducted with debit cards that  customers often would prefer not to be covered,&#8221; the report said. &#8220;Banks  charge a fixed fee averaging about $34 per incident and engage in a  number of abusive practices that help to maximize overdraft fee  revenue.&#8221;<\/p>\n<p>The Center&#8217;s review of the 13 largest national banks,  which hold about 80 percent of the $4 trillion deposits at U.S. national  banks, found that the banks automatically enroll customers in the  highest-cost overdraft program available, despite having lower-cost  alternatives, and allow multiple overdraft fees to be charged in a  single day.<\/p>\n<p>In response to concerns about overdrafts on debit  card use, the Federal Reserve approved new rules that take effect in  July, requiring banks to opt in customers to any overdraft fees charged  on ATM withdrawals or one-time debit card transactions. Bank of America  earlier this month announced it will block any debit card transactions  that would overdraw a customer&#8217;s account, to avoid charging an overdraft  fee.<\/p>\n<p><em>Katherine Reynolds Lewis is a Washington-area writer specializing in  finance, work and family issues, whose work appears in the Fiscal Times,  MSN.com, Washington Post  Magazine and Parade.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A customer applies for a payday loan in Sacramento. (The Sacramento Bee\/ZUMA Press) Increasingly, mainstream banks are offering products similar to payday loans &#8212; short-term, high-interest loans secured by a pending paycheck &#8212; according to a consumer group that called on the Office of the Comptroller of the Currency to stop the practice. Banks including [&hellip;]<\/p>\n","protected":false},"author":6632,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-515278","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/515278","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/6632"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=515278"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/515278\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=515278"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=515278"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=515278"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}