The New York Times editorial board, which has written about payday lenders previously this year (Progress on Predatory Lending) wrote earlier this week (Banks as Payday Lenders) about payday loans that are offered by banks like Wells Fargo, US Bank, Regions Financial and Fifth Third Bank. While the banks call them different names (like “deposit advance”), they share many of the same negative characteristics as loans offered by storefront and online payday lenders, including sky-high interest rates and short repayment terms.
Fortunately, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation recently released guidance to member banks that if they continue making these loans, they will face much higher scrutiny by their regulators.
Last year, the California Reinvestment Coalition, along with our national partners, Woodstock Institute, New Economy Project, and Reinvestment Partners, released a report (The Case for Banning Payday Lending: Snapshots from Four Key States) focused on payday lending which cited the dangers created for consumers in each of our states (California, Illinois, North Carolina, and New York) by these loans.
While we are excited to see this guidance, as American Banker noted, (Wells Fargo, U.S. Bank Face Crossroads on Deposit Advances) the Federal Reserve did not sign onto this guidance, which may mean that the two banks it regulates that offers these loans: Regions Financial and Fifth Third may continue making these destructive loans.
The momentum against payday loans- whether they’re provided through a storefront, a mainstream bank, or online, is growing. As an example, the Consumer Financial Protection Bureau announced its first enforcement action against a payday lender in November: The Plain Dealer: Cash America to pay $19 million – most in refunds – in CFPB’s first payday action. This momentum will likely continue growing, with the CFPB likely announcing rulemaking next year on payday lenders.
The Consumer Financial Protection Bureau is now accepting complaints about payday lenders. Consumers are encouraged to visit: http://www.consumerfinance.gov/complaint/
Are you a Californian who has used a payday loan and would like to share your story? Do you want to get involved in local efforts to restrict payday lending in our communities? If so, please contact Liana Molina, CRC’s Payday Campaign Organizer: Liana@calreinvest.org or 415-864-3980.
To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via Twitter, Google+, watch our movies on our YouTube Channel, sign up to receive our newsletter and action alerts, and of course, visit our website.