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Coming back to a bank near you: Payday loans

Coming back to a bank near you: Payday loans
Royalty-free stock photo ID: 564103672. People, withdrawal, saving and finance concept - clerk giving cash money to customer at bank office or currency exchanger.

New unemployment claims reached 22 million on Thursday while the Trump administration is helping banks and financial institutions fleece out-of-work Americans and those who could lose their jobs because of Trump’s pandemic.


The Consumer Financial Protection Bureau, the agency set up to protect consumers but has been neutered by Trump and other financial agencies, are telling banks they can practice “responsible small-dollar lending” or payday loans in areas affected by the coronavirus.

“This is the worst possible time for banks to make predatory payday loans,” said a group of consumer organizations including the National Consumer Law Center and the NAACP. “Government regulators have opened the door for banks to exploit people, rather than to help them.”

Most banks got out of the payday lending after regulators required them to underwrite loans based on the borrower’s ability to repay.

Banks once offered loans for two weeks or less with triple-digit interest rates that were disguised as fees. Some of the offenders were Regions Bank and U.S. Bank which both charged $10 per $100 borrowed which translates to an annual percentage rate of 365% for a 10-day, $400 loan.

Most banks got out of the payday lending business during the Obama administration after regulators required them to underwrite loans based on the borrower’s ability to repay.

Keith Noreika, who wore a “Make America Great Again” cap to work, reversed those rules for national banks in 2017 during his time as the acting Comptroller of the Currency. Noreika, who has returned to his job as a partner at Simpson Thacher & Bartlett, served as a “special government employee,” which allowed him to evade rules that prohibit outside sources of income and restrict outside employment.

ACTION BOX / What You Can Do About It

Tell Joseph Otting, our nation’s top bank regulator, your thoughts on high-priced lending. Call him at 202-649-6510 or write him at Office of the Comptroller of the Currency, 400 7th St., SW, Washington, D.C. 20219.

Contact the National Consumer Law Center at 617-542-8010 or consumerlaw@nclc.org

The Consumer Bankers Association spent about $3.4 million in federal lobbying in 2019. Lobbyist Richard Hunt, the association’s president, represented four of the six banks that made “deposit advances,” the more polite-sounding industry term for payday loans.

The Consumer Federation of America wants Team Trump to cap high-interest lending like payday loans and pawned car titles at 36% during the pandemic to keep borrowers from being trapped in overpriced debt. Federal banking regulators didn’t recommend a cap, saying financial institutions should offer loans in a manner that provides “fair treatment of customers.”

The Center for Responsible Lending found that borrowers who used bank payday loans took out an average of 19 loans a year at more than 200% annual interest. More than a fourth of all bank payday loan borrowers were Social Security recipients.

“At the product’s peak, bank payday loans drained consumers of $500 million a year even though they were issued by ‘only’ six banks – most banks didn’t want to get their hands on this dirty product,” said Mike Calhoun, president of the Center for Responsible Lending.

The pandemic could last for 18 months or more and cause $5 trillion or more in economic damage. In Kansas City, Mo. some food banks have closed because donations have dropped off and volunteers are staying away.

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