Payday Loan Letter Signed by Hundreds of Consumer Groups
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UPDATED: Mar 15, 2012
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A letter addressed to Ben Bernanke, Richard Cordray, Martin Gruenberg, and John Walsh has been written and signed by over 250 consumer advocate groups, pleading to the four influential federal regulators to put an end to the new payday loan practice being adopted by big banks.
According to the letter, Wells Fargo, US Bank, Fifth Third, Regions, and Guaranty Bank are all now offering “advance” loans, which are structured just like payday loans. The cash advances are short-term, high-cost forms of financing that the advocates claim “trap borrowers in a cycle of expensive long-term debt, causing serious financial harm to borrowers, including increased likelihood of bankruptcy, paying credit card debts and other bills late, delayed medical care, and loss of basic banking privileges because of repeated overdrafts.”
While some of the traditional lending institutions claim their advance loans are not the same as payday loans, the consumer advocates beg to differ, saying that bank advances:
- Often carry annual percentage rates (APRs) of 365 percent
- Are typically based on ten-day loan terms
- On average, cause borrowers to fall into unresolved debt for 175 days per year
- Are drawn out by some borrowers up to 30 times per year
- Allow banks to garnish Social Security checks before the borrowers even receive that money
The letter on bank payday lending can be found on the Center for Responsible Lending’s website, and those wishing to sign the online petition may do so there as well.
The recipients of the letter consist of both seasoned financial regulators and a brand new oversight director. Bernanke is the chairman of the Federal Reserve, Cordray is the newly appointed directed of the Consumer Financial Protection Bureau (CFPB), Gruenberg is the acting director of the Federal Deposit Insurance Corporation, and Walsh is the acting comptroller of the office of the Comptroller of the Currency. The consumer advocate groups recognize that these men are vital to have on their side in the pursuit for regulating these bank-sponsored payday loans.