Mainstream banks making payday loans
April 2010. A spokesman for the Office of the Comptroller of the Currency told a reporter that the loans described in this report are not payday loans -- that the OCC has no problem with banks making them.
“It’s not a payday loan. It’s available through banks and bank branches. It’s something you don’t get at a storefront.”
These are high-interest loans due on payday, virtually indistinguishable from storefront payday loans that have been banned in many states and by Congress to protect military personnel.
Another example of why we need stronger consumer protections in Washington. The Senate is debating financial reform. Tell them to keep it strong for consumers.
Regulators must put swift end to new trend
At least two nationally chartered banks are offering their own version of payday loans, with high fees and short-term balloon payments similar to those that cause the typical payday borrower to become trapped in long-term debt.
Because the entire loan must be repaid in short order, borrowers are likely to have difficulty both retiring the loan and meeting their other obligations. As a result, these borrowers—like the typical customer of payday loan stores—will likely take out a series of back-to-back loans, staying indebted for a significant portion of the year.
The banks market these loans as a way for accountholders to bring their accounts back into good standing after overdraft fees are assessed—essentially encouraging the repayment of one high-cost debt with another.
The OCC must stop this activity before it spreads to more banks, even in states that don't allow it from payday loan stores.
Published: February 24, 2010