NEW YORK —
Payday loans may be coming to a bank near you.

They#x2019;re marketed under a different name, but a handful of major banks already let customers borrow against their paychecks for a fee. And there are signs the option may soon become more widely available.

Banks say their loans are intended for emergencies and they are quick to distance themselves from the payday lending industry. But consumer advocates say these direct deposit loans #x2014; as banks prefer to call them #x2014; bear the same predatory trademarks as the payday loans commonly found in low-income neighborhoods.

Specifically: Fees that amount to triple-digit interest rates, short repayment periods and the potential to ensnare customers in a cycle of debt.

With a traditional payday loan, for example, a customer might pay $16 to borrow $100. If the loan is due in two weeks, that translates into an annual interest rate of 417 percent.

Since the borrowers who use payday loans are often struggling to get by, it#x2019;s common for them to seek another loan by the time of their next paycheck. Critics say this creates a cycle where borrowers continually fork over fees to stay afloat.

Banks say their direct deposit loans are different because they come with safeguards to prevent such overreliance.

Wells Fargo, for example, notes customers can only borrow up to half their direct deposit amount or $500, whichever is less.

Its fees are cheaper too, at $7.50 for every $100 borrowed #x2014; although that still amounts to a 261 percent annualized interest rate over the typical pay cycle. The amount of the advance and the fee are automatically deducted from the next direct deposit.

Wells Fargo admits that it#x2019;s an expensive form of credit intended only for short term use. But customers can max out their loans continually for up to six months before they#x2019;re cut off. Then after a one-month #x201C;cooling off#x201D; period, they can resume taking advances.

US Bank, which has more than 3,000 branches mostly in the Midwest and West, and Fifth Third Bank, which operates 1,300 branches in the Midwest and South, offer loans with similar terms and restrictions.

#x201C;When you#x2019;re allowed to be indebted for six billing cycles in a row, that#x2019;s not a short-term loan,#x201D; says Uriah King, vice president for state policy at the Center for Responsible Lending, an advocacy group based in North Carolina. #x201C;They call them short-term loans, but that#x2019;s just not how they#x2019;re used. And banks know that.#x201D;

Even if customers can only borrow half the amount of their next direct deposit, that can be a significant setback if they#x2019;re living paycheck to paycheck, King says. They#x2019;ll likely need to take another loan to continue covering living expenses.

That idea is supported by a study by the Center for Responsible Lending that found direct deposit loan users relied on them for almost six months of the year. About one out of every four borrowers was a Social Security recipient.

It#x2019;s not clear whether the weak economy has increased the use of payday loans. But a group that represents alternative financial services such as payday loans and check cashing, the Community Financial Services Association of America, says that demand for short-term credit has been rising at a steady clip in recent years.

This spring, Regions Financial became the latest major bank to offer the direct deposit loans. The bank, which operates about 1,800 branches in the South and Midwest and Texas, also began offering check cashing and prepaid debit cards at the time.

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Updated: August 28, 2011 2:28AM

Payday loans may be coming to a bank near you.

They’re marketed under a different name, but a handful of major banks already let customers borrow against their paychecks for a fee. And there are signs the option may soon become more widely available.

Banks say their loans are intended for emergencies and they are quick to distance themselves from the payday lending industry. But consumer advocates say these direct deposit loans — as banks prefer to call them — bear the same predatory trademarks as the payday loans commonly found in low-income neighborhoods.

Specifically: Fees that amount to triple-digit interest rates, short repayment periods and the potential to ensnare customers in a cycle of debt.

With a traditional payday loan, for example, a customer might pay $16 to borrow $100. If the loan is due in two weeks, that translates into an annual interest rate of 417 percent.

Banks say their direct deposit loans are different because they come with safeguards to prevent such overreliance.

Wells Fargo, for example, notes customers can only borrow up to half their direct deposit amount or $500, whichever is less.

Its fees are cheaper too, at $7.50 for every $100 borrowed — although that still amounts to a 261 percent annualized interest rate over the typical pay cycle. The amount of the advance and the fee are automatically deducted from the next direct deposit.

US Bank, which has more than 3,000 branches mostly in the Midwest and West, and Fifth Third Bank, which operates 1,300 branches in the Midwest and South, offer loans with similar terms and restrictions.

A study by the Center for Responsible Lending that found direct deposit loan users relied on them for almost six months of the year. About one out of every four borrowers was a Social Security recipient.

AP

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NASHVILLE, Tenn. Tennesseans who use payday loans to get cash quickly can now borrow up to $500 from a single lender, but could pay higher fees under a new law passed this year by the General Assembly.

The law increased the limit a person can borrow, but now payday loan businesses can now charge up to $75 in fees, under a bill sponsored by Sen. Bill Ketron, a Republican from Murfreesboro, The Nashville Ledger reported (http://bit.ly/qQiw9V).

Kelly Newell, of Joelton, has used payday loans in the past before the limit went up. She borrowed $200 and ended up repaying the loan six months later along with $360 in fees that had mounted up during that period.

While some think increasing the limit can be better, Newell said she believes it will perpetuate the debt cycle.

I dont think the limit matters, Newell says. Some people are going to borrow what theyll allow because they think something is going to magically come along, and they wont get into all that debt.

Previously the limit was $200 and lenders could charge up to $30. The law set the limit on fees to $15 per $100, but there is no limit on how long a lender can require lenders to pay the fee instead of paying off the loan.

Payday loan businesses have boomed all over the country, even outnumbering Starbucks and Burger King outlets. Cleveland, Tenn.-based Check into Cash is the third largest payday lender in the country. Founded in 1993, it operates more than 1,100 branch locations in 30 states.

Kathleen Calligan, of the Better Business Bureau of Middle Tennessee, says the trend took off in the 90s not just in Nashville, but all over the country.

Unfortunately, so many states have pretty much wrapped their arms around this industry and have given them special privileges and considerations, Calligan said. They dont have to abide by the rules that other financial institutions have to.

Calligan said the industry thrives during bad economic times and are aimed at those who have no or poor credit, the young and those who live on or near military bases.

Zach Blair, an aide to Ketron, said that by increasing the limit a person can borrow from one place, people can avoid having to get multiple loans.

A lot of the times consumers were visiting several locations and some companies were allowing two separate loans, so they were having to pay more, Blair says.

Paige Skiba, an assistant professor of law at Vanderbilt University who has researched payday loan limits, said raising the limit actually may be a good thing for borrowers.

Ive done research on this, and it shows that, when people are allowed to borrow larger amounts, it actually helps them to repay the loan rather than renewing it a bunch of times and then eventually defaulting, Skiba said.

Still some lawmakers were bothered by the rate of interest some lenders charged. Sen. Douglas Henry, a Nashville Democrat, said he didnt mind raising the limit that can be borrowed, but said he was concerned about interest rates.

I dont mind the raise to $500. Its the interest rate that worries me, Henry says. Its excessive.

___

Information from: The Nashville Ledger, http://www.nashvilleledger.com

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5 days ago 

NEW YORK (AP) — Payday loans may be coming to a bank near you.

They’re marketed under a different name, but a handful of major banks already let customers borrow against their paychecks for a fee. And there are signs the option may soon become more widely available.

Banks say their loans are intended for emergencies and they are quick to distance themselves from the payday lending industry. But consumer advocates say these direct deposit loans — as banks prefer to call them — bear the same predatory trademarks as the payday loans commonly found in low-income neighborhoods.

Specifically: Fees that amount to triple-digit interest rates, short repayment periods and the potential to ensnare customers in a cycle of debt.

With a traditional payday loan, for example, a customer might pay $16 to borrow $100. If the loan is due in two weeks, that translates into an annual interest rate of 417 percent.

Since the borrowers who use payday loans are often struggling to get by, it’s common for them to seek another loan by the time of their next paycheck. Critics say this creates a cycle where borrowers continually fork over fees to stay afloat.

Banks say their direct deposit loans are different because they come with safeguards to prevent such overreliance.

Wells Fargo, for example, notes customers can only borrow up to half their direct deposit amount or $500, whichever is less.

Its fees are cheaper too, at $7.50 for every $100 borrowed — although that still amounts to a 261 percent annualized interest rate over the typical pay cycle. The amount of the advance and the fee are automatically deducted from the next direct deposit.

Wells Fargo admits that it’s an expensive form of credit intended only for short term use. But customers can max out their loans continually for up to six months before they’re cut off. Then after a one-month “cooling off” period, they can resume taking advances.

U.S. Bank, which has more than 3,000 branches mostly in the Midwest and West, and Fifth Third Bank, which operates 1,300 branches in the Midwest and South, offer loans with similar terms and restrictions.

“When you’re allowed to be indebted for six billing cycles in a row, that’s not a short-term loan,” says Uriah King, vice president for state policy at the Center for Responsible Lending, an advocacy group based in North Carolina. “They call them short-term loans, but that’s just not how they’re used. And banks know that.”

Even if customers can only borrow half the amount of their next direct deposit, that can be a significant setback if they’re living paycheck to paycheck, King says. They’ll likely need to take another loan to continue covering living expenses.

That idea is supported by a study by the Center for Responsible Lending that found direct deposit loan users relied on them for almost six months of the year. About one out of every four borrowers was a Social Security recipient.

It’s not clear whether the weak economy has increased the use of payday loans. But a group that represents alternative financial services such as payday loans and check cashing, the Community Financial Services Association of America, says that demand for short-term credit has been rising at a steady clip in recent years.

This spring, Regions Financial became the latest major bank to offer the direct deposit loans. The bank, which operates about 1,800 branches in the South and Midwest and Texas, also announced that it would begin offering check cashing and prepaid debit cards in the near future.

The rollout of the products comes at a key juncture for the industry. Banks are under intense pressure to find new ways to squeeze profits from checking accounts in the face of new regulations.

One particularly lucrative revenue source — overdraft fees — was tightened about a year ago under a rule intended to protect consumers. The rule prohibits banks from charging overdraft fees without first obtaining a customer’s active consent for such coverage.

The fees, which are disproportionately incurred by low-income customers, generated an estimated $37 billion in 2009, according to Moebs Services Inc.

Now consumer advocates fear banks will start nudging these same customers toward direct deposit loans.

Another concern is that direct deposit loans are tantalizingly easy to access for customers who need cash in a hurry. Because potential borrowers must already have an account with the bank, there’s no application process and cash can be immediately deposited into checking accounts.

The banks’ main regulator, the Office of the Comptroller of the Currency, says it has received requests for guidance on direct deposit loans and overdraft programs. In June, the agency issued proposed guidelines saying that banks should observe “prudent limitations” and that action should be taken when banks detect “excessive usage” by customers.

The agency does not spell out what constitutes prudent or excessive. But it noted that certain practices have raised supervisory concerns. Among them: the steering of customers who rely on Social Security and other federal benefits toward the loans and a failure to monitor accounts for excessive use.

Representatives for each of the four banks declined to disclose what percentage of its direct deposit loan customers are repeat users. They also declined to disclose how widely the loans are used.

The banks stress that they reach out to customers who show signs of becoming overly dependent by speaking with them about whether another form of credit might be more appropriate.

Wells Fargo also notes that it made changes this year to make the loans more consumer friendly. A spokeswoman for the bank, Richele Messick, said that fees were previously higher at $10 for every $100. Customers could also max out advances continually for a year before the bank cut them off.

Copyright © 2011 The Associated Press. All rights reserved.

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08/23/2011 // Bromley, Kent, United Kingdom // AndrewAdams // Ashleigh Slade

The Fraud Liaison Team at short-term loans provider Payday Express has spoken out to warn potential fraudsters that just because customers can expect a quick service online, it does not mean that security will be compromised – and offenders will be prosecuted wherever possible.

Much of the payday loan industry has risen to meet customer demand for speedy digital services, which do not require paper-based applications, meaning that funds for loans till payday can be received quickly – often within as little as an hour.

Such practices can attract the attention of online fraudsters, who are keen to grab credit online wherever possible without the need to forge documents. However, forward-thinking fast payday loans company Payday Express has tackled this risk head-on by implementing a variety of identity verification checks and other measures designed to prevent fraud via its online application system. This means that the vast majority of fraudulent applications are declined at the outset.

Payday Express Operations Manager Sarah Carroll said: “It is impossible to stop all fraudulent applications, but our dedicated Fraud Liaison Team is able to make life a great deal easier for anyone who has been a victim of identity theft in connection with one of applications – and a great deal harder for any criminals attempting to exploit the quick and easy online service we offer our customers.”

The Fraud Liaison team assists fraud victims, investigates suspicious circumstances, and liaises with the police and the Serious Organised Crime Agency (SOCA) to report fraudulent activity. Reporting instances of fraud and attempted fraud helps to ensure that fraudsters are prosecuted wherever possible.

Employee Militza Smith has played an important role in the team, including assisting in breaking a fraud ring earlier this year through working with the police.

Militza said: “Seeing a fraud ring uncovered shows the value in victims of identity theft reporting the matter to the police.

“At Payday Express we work very hard to uncover any trends and links to other applications and accounts, to be able to provide as much information as possible to help the police to investigate identity theft and bring the perpetrators to justice.”

ENDS

About Payday Express:

Payday Express is one of the UK’s leading payday advance loans specialists and has been helping people across the country get access to no fax payday loans since 1999. The company is committed to responsible lending and provides customers with a discreet and reliable service that will cover their short-term credit needs.

For further information contact: Ashleigh Slade

Email: enquiries@paydayexpress.co.uk

Website: http://www.paydayexpress.co.uk

Social Media Tags:payday loans, loans, finance, cash advance, online fraud

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• 17:40, 23 August 2011 WikiSysop (Talk | contribs) deleted I have 3 50 to my name until Friday payday 61 ? (content was: Image:Payday_Loans_2256.jpg Cash Tree payday loans offer the opening to borrow cash until you become your next paycheck. It yous easy to… (and the only contributor was GreenRodrigues))

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No Credit Check Payday Loans Cash Advance Loans Offer No Bank Account Customers Ways to Access Money

Posted on | August 26, 2011 | Comments Off

As the economy continues to struggle and millions of Americans remain unemployed it comes as no surprise to see many of these individuals seeking financial assistance to no credit check payday loans. Rather than assuming that this is the final option is always a wise choice to do extensive research and understand if there are other ways to borrow money.

With a no credit check payday loan it is often the case that individuals will avoid the credit check process but they will have to pay for this in the form of upfront fees. These fees usually range between $15 and $45 for every $100 borrowed but it is very important to realize that these fees will reset each time a customer receives a paycheck or compensation and does not pay the loan off in full.

With this in mind it is a wise choice to have an exit plan when it comes to any type of cash advance loan offers in the near future. By having no bank account it is often the case that many lenders will make it a little bit difficult for individuals to borrow money but theyre still options for bad credit borrowers at the present time.

Some individuals may consider an installment loan or a bad credit unsecured personal loan as these loan types offer an opportunity to pay the money back over time. This could help many individuals avoid the fees that will likely reset each and every time they do not pay off a payday loan.

It may also be a very wise choice to access the FDIC website which will help individuals better understand how to budget their money correctly. Sometimes it is simply the case that individuals need to budget rather than spending money each and every day.

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Hope Thompson, owner and operator of Wanted or Not Swap Pawn, stands behind the counter of her business in the Cloverleaf Shopping Center. Thompson says most of the people who come to her shop are good people who need help. (Bulletin photo by Paul Collins)

Tuesday, August 23, 2011

By PAUL COLLINS – Bulletin Staff Writer

Hope Thompson said her pawn shop helps more good people than bad.

“There’s bad apples in everything. I’m not helping bad people. I’m helping good people in proportions way higher than bad people who slip through once in a while,” said Thompson, owner and operator of Wanted or Not Swap Pawn south of Martinsville.

Her clientele, she said, includes “professionals, retired people, dislocated workers … people in a tight spot.”

Pawn shop customers either sell items or get loans and put up merchandise as collateral. If they do not repay the loan, the shop can sell the merchandise.

Martinsville is considering restricting pawn shops, which currently are allowed by right in city areas zoned for commercial and manufacturing uses.

Thompson is selective about what she buys. She accepts gold and newer electronics, such as some game systems, televisions, laptops, digital cameras and other items.

The interest she charges, which is regulated by the commonwealth, is less than payday loans, she said. The Virginia law code dictates how much interest a pawn broker may charge.

Thompson estimates that since she opened the business in 2002, there have been about 15 cases in which people who sold or pawned goods at her business were charged by law enforcement and had to go to court for such things as larceny and obtaining money by false pretenses.

In addition, there are on average about one or two cases a year that are resolved without going to court, she said.

According to the National Pawnbrokers Association, less than half of 1 percent of all pawned merchandise is identified as stolen goods.

Thompson said generally people who commit crimes avoid pawn shops because of all the government regulations, which she compared to a net to catch criminals. A person who steals property generally is not going to come into a pawn shop, have to identify himself or herself and leave a paper trail, Thompson said.

“I use any available knowledge” about a customer’s background, she said. “It’s good for me to know who I’m dealing with.”

And if something seems suspicious, Thompson may not do business with the customer, she said.

Thompson said she scans pawn customers’ driver’s licenses into her computer and has several video cameras recording what happens in her business.

“Sometimes it seems more like a mission then a business. They (customers) depend on you,” she said. “I can’t meet all the demand.”

Because of the weak economy, she said she has a cash flow problem because she makes more pawn loans than she is able to sell property. For instance, she has 14 Wii video game systems in stock, “and no one has money to buy them,” she said.

When the economy was better, about 75 percent of her customers who pawned property repaid their loans and reclaimed their property. But as the economy worsened, the ratio dropped to about 50 percent.

Recently the ratio has risen to about 60-65 percent paying off their loans and reclaiming their property, and 35-40 percent not, Thompson said. “I’m seeing an improvement.”

Pawn customers repay their loans and redeem their collateral at a national average rate of about 80 percent, according to the National Pawnbrokers Association.

“We’re a poor man’s bank,” Thompson said. “Millions of people are unbankable; they can’t use a bank” because of such things as bad credit, she said.

Failing to repay a pawn loan has no effect on a customer’s credit rating, nor does it have legal consequences, according to Thompson and the National Pawnbroker Association.

Thompson is a former treasurer of the Virginia pawnbrokers association and the daughter of Beckley, W.Va., pawnbrokers Al and Anita McNiel.

Thompson said she complies with state and federal requirements — Henry County has no special pawn shop regulations — and she goes beyond. For instance, she has records since she opened the business in April 2002, though she is not required to keep records that far back, she said. Another example is she won’t accept class rings less than 30 years old unless the customer’s ID matches the name or initials on the ring.

The commonwealth requires a pawnbroker to have a license and a bond, and it requires that the pawnbroker not have been convicted of a felony or crime of moral turpitude in the last 10 years. The law requires detailed records on each transaction and daily reports that go to law enforcement, among other requirements.

A brochure by the National Pawnbrokers Association says: “Pawnbrokers are governed by all the major federal laws that apply to other entities designated as financial institutions,” including the USA Patriot Act, Truth-in-Lending Act, IRS regulations and others.

In addition to a business license, Thompson said, she has a precious metals and gems permit, which is required by Henry County and which requires additional bond, she said.

“Overall, the industry is growing; the ethics are outstanding,” Thompson said, adding that the National Pawnbrokers Association has “Best Practices for the Pawn Industry,” has a code of ethics and gives scholarships.

She said the common image of pawn brokers on TV and in the movies is “a stigma,” and when talking to Martinsville City Council members, she has used the comparison that not all politicians are corrupt.

She and her husband, Kevin Thompson, own Laurel Park Mini Golf and rent mobile homes. He formerly was a production leader and now is a process engineer at Loparex in Eden, NC She also manages Martinsville Postal Credit Union Inc. and CCC Martinsville Employee Credit Union Inc. and has a bill-pay service. They have three children.

She is a former tax preparer and bookkeeper for Kathleen Odell and Associates.

“I have integrity. I have morals,” Thompson said.

She was the PTO treasurer for Irisburg Elementary School for several years and after-prom treasurer at Magna Vista High School in 2009, and her books underwent county audits. “I always had an excellent rating,” she said.

“I don’t just run a pawn shop. I’m part of my community,” she said.

Officials with another pawn shop in the county, KF Pawn Shop in Axton, could not be reached for comment.

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As regional banks ready for new federal regulations expected to cut into profits, some of them are zeroing in on the down-and-out customer to turn a buck.

More banks are now doling out short-term, high-interest loans to customers in dire straits.

Observers worry that the loans signify an industry-wide shift toward making money from desperate consumers and — more broadly — slapping more fees on services for everyone.

“If the banks want to maintain their revenue growth, they’re going to have to come up with new profits and new approaches,” said Richard Bove, banking analyst at Rochdale Securities.

“The net result for Tennessee is an increased cost of banking, and it’s anti-consumer.”

In October, new Federal Reserve rules will limit how much banks can charge retailers for debit card purchases, reducing fees from an average now of 44 cents per swipe to 21 cents. The Fed had proposed limiting fees to 12 cents a transaction, but banking officials pushed back.

Regions Financial Corp., the Alabama-based bank with the largest market share in Nashville, estimated that the new fee cap will result in a $170 million annual loss for the company.

The change comes about a year after overdraft fees — a key money-maker for banks —were regulated by the federal government. Banks can no longer charge overdraft fees without customer approval.

Regions and Cincinnati-based Fifth Third Bank are among a new wave of banks around the country employing direct-deposit loans, which some analysts say are predatory payday loans disguised with a different name.

“You either walk into a payday loan company or you walk into a bank — at the end of the day, it’s the same thing,” Bove said.

The direct-deposit loans are targeted at consumers in emergency circumstances, the banks say, and offer checking account customers a cash advance with high interest rates.

Conventional payday loans use a written check as collateral to borrow money. Direct-deposit loans, however, borrow against a customer’s next directly deposited paycheck.

At Fifth Third, the loans charge $10 for every $100 borrowed until the customer’s next paycheck, usually a week or two. This could amount to a 300 percent annualized interest rate. For comparison, typical payday loans carry interest rates of about 400 percent.

Consumer advocates say the loans will entangle low-income borrowers in a financial mess.

Direct-deposit loans typically eat up 44 percent of a borrower’s next deposit and create the need to take out another loan, the Center for Responsible Lending recently found.

Thus, borrowers often stay in debt, on average, for 175 days and typically end up paying $900 to borrow $500 or less over six months, according to the study.

Regions entered the direct-deposit loan business this spring and has announced plans to roll out check cashing and prepaid debit cards in the coming months.

The bank says the new products are part of its overall expansion of fee-based services.

Wade Lindsey, Fifth Third’s head of retail banking in Nashville, said the direct-deposit loans come with safeguards such as restricting loan amounts and limiting repayment periods to 35 days to protect consumers.

“There’s been quite a bit of demand for the product, but we’re trying to offer this as an emergency service only,” Lindsey said.

#39;Unintended effects#39;

Anjan Thakor, professor of finance at Washington University’s Olin School of Business in St. Louis, said federal regulators were repeatedly cautioned that the new rules, many stemming from the Dodd-Frank Act, would squeeze consumers.

“I like to call it the theory of unintended effects,” when proposals introduced to protect consumers actually end up impairing them, Thakor said.

Analyst Bove said the Dodd-Frank Act, which many in the banking industry vilify, may stir consumer resentment toward banks instead of providing a feeling of security.

“Banks will start service charges for everything,” Bove said. “They used to notarize for free. Soon it could be 20 bucks. They’ll start charging you for your statements, and so on.”

He continued: “The consumer is going to go crazy and start hating banks, if they don’t already. It’s going to result in deep problems.”

Some local community banks such as Bank of Nashville view the crush of new banking fees as an opportunity to recruit customers. The bank does not offer direct-deposit loans, and it does not plan to introduce checking account service fees, according to Anne Livingston, Bank of Nashville spokeswoman.

“The new regulations and rules are going to affect everyone in the banking industry,” Livingston said. “But we’re hoping there’s enough dissatisfaction with debit card and other fees that it will drive customer volume to us and allow us to stay profitable.”

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