A new report from the Center for Responsible Lending (CRL) says some big banks act like payday lenders when they make short term loans with high interest rates.
The group’s research found that over one quarter of all those who borrow through these loans are on Social Security. And in 2011, the average borrower took out 19 loans.
It’s incredibly difficult to repay these loans, and that’s why people borrow over and over again. The initial loan amount may be relatively small, but the interest is high.
In some cases, payday lenders charge 400 to 600 percent. CRL says big banks include Wells Fargo Bank, U.S. Bank, Regions Bank, Fifth Third Bank, Bank of Oklahoma and its affiliates, and Guaranty Bank.
The report says the banks claim, “…their product is not a payday loan because they call it an open-end line of credit.” But even though the loans aren’t technically pay day loans, CRL says they are structured the same way. “These are short-term balloon loans that borrowers are unable to repay in full when due. They carry triple-digit interest rates, lack meaningful underwriting to assess a borrower’s ability to repay, and ensnare customers in a cycle of long-term debt that leaves them worse off.” Advice The best advice here is to stay away from high interest loans and find out what the interest is before you borrow.