Pressure builds to end bank payday lending

Written by Dan Fair on April 24, 2013 - 2:46pm
A staggering amount of support is pouring in from around the country calling on federal regulators to end payday lending practices by banks and through bank support. News reports indicate that prudential regulators will release guidance on Thursday strongly limiting bank payday. Yesterday, our partners at the Sargent Shriver National Center on Poverty Law authored a blog post demonstrating the large role banks play in these short-term, high-cost loans. Reinvestment Partners went further, identifying exactly how much banks are giving to fringe lenders.

Last month, Woodstock joined more than 250 organizations in sending a letter to leaders of the Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, Federal Reserve Board, and Federal Deposit Insurance Corporation to end the practice of payday lending by banks.

In a separate online petition circulated by the Center for Responsible Lending, more than 157,000 individuals signed on to tell the same regulators that banks should have no place in offering these loans.

The message is clear banks should have no part in offering loans that are not affordable for many of the consumers obtaining them. The practice is antithetical to the obligations banks have to serve community credit needs in a safe and sound manner.

Bank payday loans often violate state consumer protection laws. In Illinois, for example, we enforce ability to repay standards by limiting the amount of debt a borrower can take out as a percentage of their income, but bank payday lenders don’t assess whether the loan exceeds a percentage of the borrower’s income.

Each day that regulators don’t act is another day consumers get one of these products, not knowing that on average they will take out 18 more loans before escaping the cycle of debt.  We can’t wait any longer. Consumers and advocates agree: the time to end bank payday lending is now.