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BankThink: High-cost bank loans a step in the wrong direction

Wednesday, October 3, 2018
Rebecca Borné | American Banker
Rebecca Borné

U.S. Bank recently introduced a new small-dollar loan product. By the bank’s own description, it’s a high-cost product, at 70-88% APR.

High-cost loans by banks offer a mirage of respectability. A component of this illusion is the misguided idea that limiting payment size to 5% of gross income means the loan is affordable for most borrowers. But these products will be unaffordable for many borrowers and ultimately erode protections from predatory lending across the board.