Two have. Wells Fargo and U.S. Bank announced that they will discontinue their deposit advance products, which are typically short-term loans of a few hundred dollars that are automatically repaid from a customer’s checking account each pay period. Similar to payday loans, they carry triple-digit interest rates when calculated on an annualized basis.
Consumer advocates, like the Center for Responsible Lending, call them “predatory” and have asked federal regulators to ban the products. According to the Center for Responsible Lending, the average advance loans carried a term of 10 days, plus a fee of $10 per $100 borrowed, amounting to approximately 365% APR. Such loans carry such steep fees that borrowers often can’t afford to pay them back by the time the loan is due leading the borrower to renew the existing loan or take out additional loans.
In late 2013, the Federal Deposit Insurance Corporation (F.D.I.C) issued a warning to banks, saying that small-dollar loans need to be affordable and that the borrower’s ability to repay needs to be taken into consideration when issuing these loans. Now, several banks, including Wells Fargo and U.S. Bank, have decided to scrap these loans altogether.
If you are struggling to pay your basic living expenses, schedule a consultation with one of our debt settlement attorneys who can likely help you deal with excessive debt without incurring the exorbitant interest rates of payday-like loans.
Kevin Fallon McCarthy
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