Regions Bank has launched a program to target consumers who use nontraditional means to move their money around instead of banks.

The program, called Now Banking, gives customers the ability to cash any check, perform money transfers and reload prepaid debit cards.

Customers also can secure short-term loans, more commonly called payday loans, directly through Regions in a program called Ready Advance.

“We found that our customers had to go to an alternative financial service provider to get those services, and that was an eye opener for us,” said John Owen, senior executive vice president and head of consumer services for Regions. “We are trying to reach a broader audience.”

The Birmingham, Ala.-based lender estimates that 23 percent of its customers are also customers of alternative financial services such as check cashing, money order and payday lenders. That’s not counting the 10 percent of Tennessee customers who don’t use banks at all, according to a 2009 Federal Deposit Insurance Corp. survey.

While those who are “underbanked” may cut cleanly across socioeconomic lines, the “unbanked” tend to be poor minorities, according to the survey.

A significant number of the unbanked are Latino immigrants, the federal agency said.

New markets

As Regions finishes rolling out Now Banking through the end of the first quarter, it hopes to capture a share of the unbanked and underbanked market. Ninety percent of Regions branches offer the services at more more than 1,700 locations in 16 states.

Regions bills the most controversial of its new services — payday or direct deposit loans — as a safer alternative to nonbank lenders. The bank’s Ready Advance is less expensive than most payday loans, but it’s also only available to customers who have been with the bank for nine months or more.

But Kathleen Day, spokeswoman for the Center for Responsible Lending, worries that banks are pushing a product that hurts consumers more than it helps.

“They call them direct deposit advance, but they are payday loans with the same high cost and structure that traps people into a cycle of debt,” Day said.

Since the bank takes its money first, repaying itself out of a customer’s direct deposit, borrowers can’t fall behind on their loans but could be short on their other bills, Day’s group argued in a letter to federal regulators.

More than 250 consumer groups wrote to regulators opposing bank-based payday lending.

“Ultimately, payday loans erode the assets of bank customers and, rather than promote savings, make checking accounts unsafe for many customers,” Day said.

Bank payday loans carry an annual percentage rate of 365 percent based on a typical 10-day loan, and bank payday borrowers are in debt for an average of 175 days in a year, according to a study by the Center for Responsible Lending.

Broad spectrum

But Regions contends it is doing a favor for customers who would otherwise be paying higher interest at other lenders.

A Regions survey found that a broad spectrum of people, not just the poor, used nontraditional banking services at least occasionally.

The bank said 36 percent of nontraditional customers have incomes of less than $50,000, 31 one percent reported income of between $50,000 and $100,000, and 20 percent earned of more than $100,000.

“Feedback on Ready Advance has been very positive,” Owen said. “They’ll say, ‘I was getting this loan through such and such company, and I was paying double what I’m paying with Regions.’”

Regions charges $10 per $100 loan, compared to an average amount charged of between $15 and $18 at most other payday lenders, he said.

And almost half the customers enrolled in Regions’ new offerings were previously unbanked customers, who had formerly been at the mercy of nonbank lenders, Owen said.

Next steps

To continue to bring customers into the banking system, Regions is considering reducing the waiting period from nine months before a customer can enroll in payday banking, and introducing savings incentives as well.

But Owen says the payday loans are just a small portion of Regions’ new offerings. He’s most proud of giving customers the ability to cash any check, perform money transfers and reload prepaid debit cards.

Prepaid cards are perfect for parents who want to keep college-bound children on a short leash, and the check cashing and money transfers broaden the bank’s product offerings for business owners or immigrants who need to send money to family in other cities, he said.

“We will take a personal check, two-party check, insurance check, anything you can show up with,” he said. “The way we look at it as a company, the primary products we offer in this sphere are the Now Banking products; the Ready Advance is just a small part of this.”

Copyright 2012 the Chattanooga Times/Free Press (Chattanooga, Tenn.)

Distributed by MCT Information Services

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(PRWEB) February 11, 2012

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The meeting was called by City Councilwoman Kim Rafferty, who hopes to lay the foundation for a clearinghouse of available institutions willing to provide services to those now turning to high-interest and high-fee payday lending and check cashing businesses.

The 10 am meeting to form Bank on Birmingham comes two months after the city imposed a six-month moratorium on new licenses for such businesses.

We cant get rid of the payday loans, but we can give people alternative choices and education so there is no need for payday lenders in the city of Birmingham anymore, Rafferty said. We cant tell people how to spend their money, but we can give them better opportunities. This is a consortium of banking institutions that produce a product that meets the local need.

Birminghams project is modeled after initiatives including San Franciscos Bank On program that includes financial education and counseling, low-cost checking and savings accounts, electronic pay solutions and alternative small payday loan programs.

Residents in that city have opened tens of thousands of checking accounts through the program since it began in 2006. It has been cited as a national model.

Nashville this week became the latest city to adopt the concept with the creation of Bank On Music City.

Birminghams conversation about residents with poor credit and few options was piqued in December when the City Council passed the moratorium.

Since then, the federal Consumer Financial Protection Bureau held its first field hearing on payday lending to a standing-room-only audience in Birmingham.

The citys temporary halt on new approvals for the businesses was proposed by Councilwoman Lashunda Scales. Scales, who was not involved in Raffertys initiative, said she would continue her efforts to combat the proliferation of payday lending businesses.

I applaud Councilor Raffertys efforts; however, as a committee we will remain focused on the charge at hand, which is to minimize payday lending institutions within the corporate limits of the city of Birmingham, Scales said. In weeks to come, as chair of the economic development committee, I am going to have several town hall meetings regarding the facts of payday lending institutions and the disastrous effects it has on the inner city.

Mike Milner, executive director of Alabama Asset Building Coalition, said his group has worked to form a Bank on Alabama group and will participate in todays meeting.

Each one is different and unique, and they wanted to form a template that could be used in multiple communities, Milner said of the Bank On groups. You can go into any bank or credit union thats a part of this program and, if they cant open this account for you, theyll refer you to an institution that can. What were talking about is a great referral system.

Milner said the program will be a major step toward financial independence for many with limited banking options.

Were trying to get the money out of the cookie jars, out of the mattress and out of pockets and into a financial institution, Milner said. Its the first step.

While challenged customers wont provide a large new revenue source, banks will benefit from the program by improving their image with the goodwill gesture, said University of Alabama economics professor Gary Hoover. It will also create added pressure for existing payday operations to modify their practices, he said.

However, Hoover cautioned that no program will succeed unless customers themselves embrace financial responsibility. Some of the targeted clients previously held bank accounts, and have poor credit and other problems that led to their expulsion from the mainstream financial system.

Thats the reason these payday loan places exist in the first place, Hoover said. But youve got to hope the people change their practices. This is a chance to put them on the right track.

POSSIBLE ELEMENTS OF BANK ON BIRMINGHAM

o Financial education and counseling.

o Access to low-cost checking and savings accounts.

o Electronic pay solutions.

o Alternative small payday loan programs with payment plans and lower interest rates than standard payday lenders.

Sources: Birmingham City Councilwoman Kim Rafferty; San Francisco Office of Financial Empowerment

Join the conversation by clicking to comment or email Bryant at jbryant@bhamnews.com.

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Mr. Miller-Cheevers, who is also CEO at payday loans company speedeloans, says: According to the report, not even a Maths PhD student was able to correctly calculate the charges and fees related to an unauthorised overdraft with four different banks.

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Some large banks are offering short-term loans akin to those offered by payday lenders, says a report from the Center for Responsible Lending, a nonprofit group.

Payday loans are short-term advances of relatively small amounts, often with hefty fees, that are repaid when the borrower’s paycheck arrives. Consumer advocates say the loans are extremely expensive compared with other forms of credit, like credit cards, and can often lead borrowers into a debt spiral they can’t escape. The new Consumer Financial Protection Bureau recently convened a public forum to gather information about payday lending by both banks and nonbanks.

Concern about payday loans has previously focused on storefront payday lenders where, according to the responsible lending center, fees can translate into annual interest rates of more than 400 percent. But the centers report looks at four big banks (Wells Fargo, US Bank, Fifth Third and Regions) that also offer advances to customers who have their paycheck, or their benefits check, directly deposited into their checking accounts. More banks appear to be interested in offering the service, according to the report from the center, based in Durham, NC

The advances can be as large as $500, for which the bank charges a fee typically, $10 for each $100 borrowed. When the next scheduled direct deposit arrives, the bank deducts the advance, plus the associated fee. Usually, the advance must be repaid within 30 to 35 days. (In some cases, customers can pay back over a longer period of time).

The banks say the funds are meant to be used as a short-term solution to an emergency cash crunch, rather than a long-term way of managing your money. So what’s the problem?

Consumer advocates say the loans are costly and encourage users to overspend. The average annual percentage rate for the bank advances assuming a fee of $10 per $100, for a typical loan outstanding for 10 days is 365 percent, the centers report says.

The annual rate drops to 120 percent for a loan term of one month, which is the maximum time such loans are typically left outstanding, the center’s analysis found. Even so, an annual rate of 120 percent “is significantly more expensive than alternative credit products such as credit cards or consumer finance loans,” the report notes. By comparison, the report notes, in the second quarter of last year, the average credit card interest rate was 13 percent.

Two of the banks Fifth Third and Regions cite an annual percentage rate of 120 percent in explanations on their Web sites. Fifth Third uses the number, even though there is no interest rate associated with its advance product, its Web site says, “so our customers can compare the cost of using this product against other forms of credit.

Regions, meanwhile, notes in its disclosure that customers who opt to pay their advance back over time will pay the fee, plus 21 percent interest. But if the fee also is taken into account and presented on an annualized basis, the cost of a cash advance would be significantly greater than the APR of the periodic-rate interest alone and may be 120 percent or more.”

“We are mindful of our responsibility to partner with our customers and we seek to establish an environment that encourages responsible lending and repayment, John Owen, senior executive vice president of consumer services at Regions, said in a statement after testimony at the financial protection bureaus hearing in Alabama last month. The bank started offering the loans, called Ready Advance, last May. (Repayment information from the Regions product is reported to credit bureaus, the bank says, and so may help consumers rebuild credit.)

A Wells Fargo spokeswoman says the bank doesn’t provide an APR figure in its disclosures for the advances, which it has offered since 1994, because the associated fee doesn’t change over time. If someone borrowed $300, the fee would be $22.50, regardless of when they pay it back. “It’s a very transparent fee,” she said. “The customer knows when they’re getting the service what their charge is going to be.”

Still, Wells Fargo, which charges $7.50 per $100 borrowed (which translates to 270 percent APR for a 10-day loan term, the center says), warns customers on its Web site that a direct-deposit advance can be costly. “It is important to note the service is an expensive line of credit intended to assist with short-term borrowing needs and is not recommended as a solution for your long-term financial needs,” the site says.

Wells Fargo provides a comparison of the cost of the loan with other forms of credit, she said, so customers can evaluate their options.

A spokeswoman for US Bank, Teri Charest, said in an e-mail that an extremely small percentage of its customers use the checking account advance feature, which is intended for emergency needs, like an unexpected medical expense or car repair. The bank limits how long customers can use the advance, to help them avoid becoming overextended, she said. Projecting an APR for advances is not appropriate, she said, because the fee must be repaid with the next direct deposit. But, she said, each time customers use the advance, they receive a warning that it is high cost credit and meant for short-term needs.

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HERTFORDSHIRE, ENGLAND, January 19, 2012 /24-7PressRelease/ — The latest figures from www.speed-e-loans.com highlight that the average customer in December 2011 had 30% less debt than an average customer in December 2010 – suggesting that last year, Brits managed their finances responsibly by cutting their debt.

The average payday loans customer non-related debt was down from GBP8,559 in Dec 2010 to GBP5,596 in Dec 2011.

But while they may have cut their overall debt, they may also have cut loose and treated themselves at Christmas. The payday loans lender completed nearly three times as many loans in December 2011 compared with December 2010.

Mr. Miller-Cheevers, CEO from speedeloans says: This may suggest that after a long, hard year of scrimping and saving, people were sticking their fingers up at the Recession and decided they were going to celebrate Christmas properly.

The figures also revealed that, compared with December 2010, the average payday loans customer in December 2011 was:

- earning 3% more (the average Dec 2011 monthly pay being GBP1,745 compared with GBP1,701 for the same period 2010);
- had a better public credit score (increasing from 481 in Dec 2010 to 497 in Dec 2011).*

Mr. Miller-Cheevers continues: This data seems to indicate that despite the Recession, people are overall earning more and having less debt – all positive signs.

*A higher Public Credit Score indicates that the customer is a better risk.

About Us

www.speedeloans.com is a practical alternative to banks that can no longer help their customers with their short term financial needs. Privately backed by people who understand our customers, our mission is to provide instant decisions and two hour money whenever they need it.

We are at the cutting edge of modern consumer finance by offering small, short term loans online with real speed and ease. We are flexible and paper free which means you can apply using our easy-to-use website whenever you need cash in a hurry. We have a consumer credit licence from the Office of Fair Trading.

In August 2011 we won an award for Most Responsible Lender which we welcome as proof that we are doing the right thing both for our own business, but also more importantly, our customers.

—
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LITTLE ROCK (Attorney General Dustin McDaniel) – Attorney General Dustin McDaniel filed a consumer protection lawsuit today against a Missouri man and two companies that control six Internet payday loan websites offering loans to Arkansas consumers at interest rates of more than 600 percent.

The Attorney Generals lawsuit claims defendant Josh Mitchem and companies, PDL Support LLC and Platinum B Services LLC of Kansas City, Mo., control the operations of the payday loan websites, purported to be based in the Caribbean island of Nevis. According to the complaint, regardless of their location, the unconscionable interest rates charged by the lenders clearly violate Arkansas law.

The websites operated by these defendants offer loans that push consumers further and further into debt, McDaniel said. These usurious practices are just as illegal when offered on the Internet as when they were offered from storefronts in Arkansas. We shut down lenders operating in Arkansas and will continue to take action against online payday lenders.

The defendants and the websites they control offer loans with interest rates and fees far exceeding the amounts allowed by Arkansas law. One contract disclosed an annual interest rate of 644.12 percent. Interest rates for other loans were also greater than 600 percent.

The lawsuit states that Mitchem, PDL Support and Platinum B Services control the websites, phone numbers, fax numbers and bank accounts used to make and collect upon the loans. While the lending entities were said to be located in Nevis, all lending operations were based in the Kansas City area.

The lenders known to be controlled by the defendants include: Action Payday, Bottom Dollar Payday, Everest Cash Advance, Paradise Cash Advance, Red Leaf Lending and The VIP Loan Shop.

McDaniels lawsuit seeks an injunction to prohibit the defendants from offering or collecting upon the illegal loans in Arkansas, restitution to consumers and civil penalties.

Arkansas consumers with problems related to online payday loans or debt collectors attempting collection on payday loans may contact the Attorney Generals Consumer Protection Division at (501) 682-2341 or (800) 482-8982, or visit the Attorney Generals website at www.arkansasag.gov.

Source: Attorney General Dustin McDaniel

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Pet owners who cant afford to pay for medical treatment for poorly animals are being targeted by a payday lender offering loans with up to a 2,120 per cent interest rate.

Payday loans are designed to tide consumers over until their next wage instalment – but they often come with eye-wateringly high rates of interest and experts warn that they are cynically targeted towards the financially vulnerable.

One lender, Petloan.co.uk is offering short-term loans to specifically cover unexpected medical expenses caused by vets bills. But anyone taking out a £200 loan from the lender for 30 days will face £58 in interest when repaying.

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WHAT have insolvency practitioners, pawn brokers, payday loan firms, job centre workers and Greggs the baker got in common?

There may be several things but the most obvious is that they are all beneficiaries in some way of the financial turmoil in which we remain mired.

In the case of payday loan firms, their growing success (and notoriety) masks a deeper trend. Some two million people in the UK have taken out payday loans in the past year, according to payday group Ferratum, and experts believe that number could rise to 3.5 million before the end of this year as unemployment rises and the squeeze on household incomes intensifies. Their ominous progress into the mainstream could result in them overtaking credit cards, PwC predicted last week.

The extortionate interest rates that payday lenders charge to borrowers struggling to repay their loans condemn ever more people to a spiral of debt from which few will escape. Two in five debt clients seen by Citizens Advice Scotland are going without food or fuel to repay their debts as creditors, including payday loan firms, become more aggressive in pursuit of them.

But a draconian crackdown would be counterproductive because payday loans are not the uniform rip-off they may seem. As PwC pointed out, they are attracting a wider range of borrowers as more people turn to the flexibility of short-term loans at the expense of high street lenders.

Taking control of the payday loan market is not simple; it needs regulation and the more unscrupulous firms banned as a matter of urgency. Focusing purely on the high annual percentage rates of interest would be unhelpful, much as they help highlight the potentially crippling costs for those unable to repay on time.

The emphasis should be on consumer protection by banning the roll-over of interest (in favour of fairer debt repayment methods); reining in TV advertising; using repayment illustrations to help people understand how the costs can roll up; imposing a cap only at a high rate to prevent lenders from recouping their costs through less transparent charges; raising awareness of alternative forms of finance, such as credit unions; opening up banking for the financially excluded and boosting access to free financial advice and debt guidance services.

Kiss goodbye to romantic notions

It’s Valentine’s Day on Tuesday but if you’re expecting your partner to splash out this year it might be worth reviewing your expectations. Scots have cut back the amount they spend on their partners by more than a sixth, on average, as they feel the financial pinch.

We all know it’s the thought that counts and it’s just as well, with seven in ten Scots now opting for cheaper dating activities, according to research by Santander Credit Cards.

People in Scotland spend just over £953 a year on their other halves on average, when the cost of birthdays, Christmas, Valentine’s Day, anniversaries and other occasions is combined. That may seem generous yet it’s almost £100 less than two years ago.

One in ten Scots say they are buying their partner fewer gifts because they don’t have the money and another 10 per cent are being careful because they’re worried about their financial situation. Around 3 per cent claim to have been deterred from relationships entirely because of the perceived financial costs.

Saving money is common sense right now, but keep an eye on that fine line between frugality and being tight-fisted. In other words, no matter how skint you are, don’t buy your other half the Asda Valentine’s card unless they have a very dry line in humour. With the “Smart Price” logo on the front and the legend “my love for you is priceless!” on the inside, this 7p card could have been dreamt up by divorce solicitors.

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