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.