Steven Schlein, spokesman for the Community Financial Services Association of America, an Alexandria, Virginia-based trade association that represents payday lenders, said banks unfairly compete with payday loan stores because they’re exempt from laws limiting interest rates.
“What the banks are doing are payday loans,” Schlein said. “Let’s have everybody operate under the same system.”
The Federal Deposit Insurance Corp. has made banking access for low-income consumers a priority, according to agency spokesman David Barr. A December FDIC survey found there were 17 million U.S. adults with no bank accounts and 43 million who rely on financial services such as payday loans.
The FDIC launched a pilot program in 2008 to encourage banks to make loans of as much as $1,000 with interest rates at 36 percent or less. Thirty-one banks participated, making 16,000 loans for a total of $18.5 million.
In contrast, payday stores and Internet lenders make about $42.1 billion in loans a year, according to Stephens Inc., an investment bank and financial research firm. Lenders earn about $7.3 billion on fees from those loans, according to the company.
Consumer groups oppose payday loans whether they’re being made by a bank or a payday lender, said Jean Ann Fox of the Washington-based Consumer Federation of America. Wells Fargo, U.S. Bancorp and Fifth Third’s cash advance products are structured exactly like payday loans, she said.
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