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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 20, 2012

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Despite prohibiting no fax payday loans across the state, North Carolina regulators and consumer advocates have noticed their resurfacing.

A no fax payday loan, is simply a cash advance loan that is made without a fax machine. In years past, fax machines allowed borrower to apply for payday loans without having to visit a retail lending store. Now, most payday loans are no fax payday loans since they are offered online and at retail lending stores. It seems a similar type of financing is now being offered in North Carolina despite a longstanding ban.

Regions Bank has allegedly been offering loans that violate state usury laws, according to a Charlotte Observer news report.

The bank offers “Ready Advance loans,” which state Attorney General Roy Cooper believes are thinly veiled no fax payday loans.

“We do not want North Carolina consumers subjected to payday loans. Payday loans are like a consumer needing a life preserver being thrown an anvil. It gets them on a debt treadmill, oftentimes,” said Cooper.

Regions Bank countered that its Ready Advance loans are not no fax payday loans. They claim the loans are simply financing that fulfills obvious customer needs.

“One of the things we believe is very important is we want to make sure our customers do have access to credit. Certainly, we do believe that this is an expensive form of credit. It is intended to be used occasionally for emergencies,” said Regions Bank spokeswoman Evelyn Mitchell.

North Carolina carries the distinction of being the first state in the country to prohibit payday lending. In 2001, a law that permitted payday lending was allowed to expire, making the practice illegal by default.

Chris Kukla, a lawyer at the Center for Responsible Lending believes that Regions Bank is “basically thumbing their nose at the people of North Carolina who clearly don’t want this product in their borders.”

Regions Bank shrewdly operates out of the state and only offers the Ready Advance loans online—where they are difficult to police.

“Over the years, payday lenders have used tricks to get around the law. We are in the preliminary states of looking into this,” said Kukla.

State regulators aren’t the only force facing off against Regions Bank. The Federal Deposit Insurance Corp has also announced it is investigating “advance” loans offered at banks in order to see if they undermine state laws.

“We could foresee working with the FDIC on this matter,” said Cooper.

Despite the involvement of both state and federal regulators, Regions Bank remains defiant.

“It is not a payday loan. We don’t allow people to roll that loan over. You can’t take out another loan to pay back your existing loan,” said Mitchell.

Regions Bank has not kept the Ready Advance loans exclusive to North Carolina. The Banks’ 1,700 branches across the country all offer the same type of financing.

Perhaps more worrisome to regulators and consumer advocates is the potential for other banks to mimic Regions Bank’s success in North Carolina. Financing similar to no fax payday loans may multiply in not only North Carolina, but other states that have cash advance restrictions as well.

“Other banks might look at it and say if Regions has taken the reputational hit for offering a predatory product in North Carolina, then if we go and do the same thing we don’t look quite as bad,” said Al Ripley, director of consumer and housing affairs at North Carolina.