I shouldn’t be surprised after spending the last month or so investigating the practices of banks with regard to way they charge their customers ridiculous overdraft fees, but I was shocked to learn recently that a number of banks are offering predatory Payday Loans, a la your local “Checks Cashed With No I.D. Necessary” joint. To be fair, it’s not every bank, but it’s a few of the big boys.
It seems US Bank, Regions, Fifth Third, Guarantee Bank and others have found another way to exploit the economically disadvantaged, much as they’re doing in the realm of overdrafts, by offering Payday Loans at sky high interest rates, sometimes exceeding 400%.
The indispensable staff at the Center for Responsible Lending (CRL) has been hot on this issue for a while now, and has compiled a fact sheet which can be viewed here. In speaking with the CRL, I learned the average Payday Loan customer is in debt for 175 days out of the year and the average loan carries an interest rate of 365%. And, not surprisingly, Payday Loan customers pay more overdraft fees than non-Payday Loan customers and are more likely to lose their bank accounts. It’s all related.
Federal Legislation has been passed to protect military families from Payday Loans that target them specifically, and some states have either banned or limited the practice, but there are still many areas of the country where the banks are operating unchecked. We are just getting started looking at this issue, but rest assured it’s still safe to assume to banks are not on your side – regardless of how happy the actors look in their commercials.
Banks, it seems, will never cease to amaze me – and I'm not the only one. Check out the New York Times article about the Goldman Sachs executive who quit the banking behemoth and blew the whistle on how little has changed in the industry since the Fall of 2008. Apparently at Goldman Sachs, they call us "muppets" behind our backs. Don't get excited – they don’t mean it as a compliment.