| The petition to federal banking regulators reads: | |
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"Payday loans target financially vulnerable borrowers with excessively harsh terms they cannot afford. These loans
all too often push families teetering on the brink of financial disaster right off the cliff. Stop big banks from offering predatory payday loans to their poorest customers." | |
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Dear Jim,
Some of the nation's largest banks are looking to make obscene profits by exploiting some of the country's poorest people,
and we need to make sure federal banking regulators put a stop to it.
Banks like Wells Fargo, U.S. Bank, Fifth Third Bank and Regions Bank have started marketing payday loans to their customers.
These short-term, high-cost loans are blatantly predatory. The fees charged for making these loans are equivalent on average
to more than a 300% annualized interest rate.
And while payday lenders like to pretend it's a solution to a short-term cash crunch, the fact is that they make their money
when loan recipients pay off one loan by taking out another payday loan, thereby falling into a cycle of debt that's hard
to escape.
Payday loans are short-term cash loans generally secured by a post-dated personal check written by a borrower. A payday lender
holds the check until the borrower's next payday, when both the loan and a finance charge must be paid.
Compared to other types of loans, payday loans are ridiculously (not to mention, unethically) expensive.
Payday loans don't help cash-strapped families, they make their financial situation worse.
This is why a number of states either heavily regulate or outright prohibit the practice of offering payday loans.
But now some of the biggest banks have started offering what are essentially payday loans, only instead of holding a check
to secure the loan, they simply setup an automatic withdrawal from the checking account of their customers.
Federal bank regulators have the power to stop banks from offering payday loans, and need to take action before the practice
becomes more widespread.
Last month, five senators wrote to federal banking regulators urging them to stop the banks from offering payday loans, and
we've heard from other advocates who work on this issue that the regulators are expected to make a decision soon.
The large banks making payday loans are sophisticated financial institutions that extend credit at exorbitant rates to largely
financially unsophisticated borrowers desperate for cash, without consideration of whether the borrowers can repay the loan.
It's almost the definition of predatory lending.
And bank customers who take payday loans land in a cycle of debt that on average takes 175 days to escape.
As our country begins to recover from the economic crisis, the last thing we need is to allow more bad loans. We need the
banking regulators to act quickly to ensure this predatory product does not become business-as-usual in our nation's banking
system.
Click the link below to automatically sign the petition telling federal banking regulators to stop big banks from offering
predatory payday loans to their poorest customers.
Thank you for speaking out.
Matt Lockshin, Campaign Manager
CREDO Action from Working Assets
CREDO Action from Working Assets
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