Annette Smith, a 69 year-old resident of Rocklin, California, will testify in Washington DC to the Senate Select Committee on Aging about her experience using a Wells Fargo “Direct Deposit Advance” loan on Wednesday, July 24, 2013. Smith originally took out one of these loans for $500 in 2007, but because of the repayment terms, she was forced to continue renewing the loan almost every month, which resulted in her paying $2,990 in fees and interest over a five-year period.
If you would like to watch the hearing, titled “Payday Lending: Short-term Solution or Long-term Problem?” it will be aired live on the Senate Select Committee website beginning at 2:00PM (EDT).
The FDIC and OCC both announced proposed rule-making for these types of loans earlier this year. In a letter to federal regulators about the proposed rules, CRC along with 62 other California community groups, advocated for the following changes:
1) Loan repayment terms should be changed to match existing standards for loans and lines of credit, with customers expected to pay regular payments that would cover a portion of principal, fees or interest over a predictable period of time.
2) Banks should not continue making advances until at least one statement cycle after the customer has repaid the previous advance, thus preventing the destructive cycle of one loan turning into a cycle of debt and fees that repeats itself every month.
3) Loan disclosures should make it easy for customers to compare direct deposit advances against other loan options. This includes stating the cost of the loan as an Annual Percentage Rate (APR), a practice storefront payday lenders in California are already required to follow.
Have you had a negative experience with a payday loan or a bank deposit advance loan? CRC would like to hear from you. If you’d like your story to be public, then comment on this blog post (and, pending approval, it will appear under this blog post), or send us an email: firstname.lastname@example.org and we’ll contact you.
Triple-Digit Danger: Bank Payday Lending Persists (March 2013)