Wells Fargo, U.S. Bank Weasel into Payday Loan Business

Wells Fargo, U.S. Bank Weasel into Payday Loan Business
Wednesday, April 07, 2010

Having been banned by the federal government from partnering with payday lenders, some large national banks are now directly making these kinds of high-interest loans to consumers—and avoiding restrictions that limit how much they can charge.

This problem was profiled in a report by the Center for Responsible Lending, which is calling upon the Office of the Comptroller of the Currency (OCC), the regulator of national banks, to impose new rules affecting these institutions’ ability to offer payday loans.

Banks such as Wells Fargo and U.S. Bank are providing customers with advances on their paychecks that can come with fees consuming as much as 10% of the advance. The interest rates can amount to an annual percentage rate of 120% or higher, according to the Center’s report.

Whereas smaller payday-loan lenders are restricted by state rules from charging triple-digit interest rates, banks like Wells Fargo and U.S. Bank are allowed to do so because they are overseen by the OCC.

“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.”


http://www.allgov.com/Where_is_the_Money_Going/ViewNews/Wells_Fargo_US_Bank_Weasel_into_Payday_Loan_Business_100407

legislation or regulation that would make it less profitable for them so as not to destroy the Pay day loan business. Not that I like Pay Day loan biz. But then they would just buy up the Pay Days and spin them off as a stand alone. And I doubt the regulators are that far thinking.

Unless the regulations on its use have changed, there is a 9-month limit to its continuous use, then one must wait a full month before it can be used again up to nine months; it also has limitations on the amount one can borrow per loan so to not completely wipe out a full paycheck. One must have an employer who directly deposits one's paycheck. While it may take several payday cycles to wipe out the debt incurred to cover the emergency, it can be used responsibly.

Not having any credit cards, this option has been a lifesaver when the spouse's UI has been stalled by a waiting period and/or glitch or when an unexpected medical emergency or a necessary car repair has occurred. Used responsibly, this program has seen us over various problems.

BTW, not recommending this method for general use for purchasing unneccesaries because it does come at high cost; when things beyond one's control or planning go haywire, it does provide an option.