Watch Out: Big Banks Making Short-Term, High Interest Loans

Report finds that nation’s largest banks are driving middle class into a cycle of debt

High interest, high-risk payday loan lenders target poor and minority communities. That’s a fact. Recently, there was a time when big financial institutions didn’t want to be associated with the “predatory” image. Well, some of the nation’s largest banks aren’t really that concerned. According to a new report from the Center for Responsible Lending, at least six of them are still offering these financially destructive products. The center’s study names Wells Fargo, U.S. Bancorp, Regions Bank, Fifth Third Bank, Guaranty Bank and Bank of Oklahoma as leaders in the perilous advance-deposit loan industry. With promotional language like “Early Access” and “Ready Advance,” the average borrower was saddled with $10 of debt for every $100 borrowed. The agreement stipulates that the loan would be repaid with the borrower’s next direct deposit paycheck. But if the borrower’s paycheck doesn’t cover the loan, the banks take whatever money that comes in and tack on overdraft fees and additional interest of up to 300 percent. The center’s study found the average borrower took out at least 13 loans in 2011 and subsequently spent much of the year saddled with the debt. A Wells Fargo spokeswoman says they have been “very clear that this is an expensive form of credit and not to be used as a long-term solution.” Of course, borrowers interviewed for the center’s study say they were not fully aware of the full range of fees attached to the payday loan. Well, now you know. (Washington Post)

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