Big Banksters In Need Of More Profit Begin Easing Into Offering High Cost, Short Term Loans To Cash/Credit Challenged Clients; Create Competition With Storefront, Online Payday Loan Peddlers

Bloomberg reports:

• Banks facing lower revenue from debit-card and overdraft fees are ramping up marketing of small short-term loans, prompting regulators to question if they carry the same risks to borrowers as other forms of payday lending.
  
  The high-cost loans offered by firms including Wells Fargo & Co. (WFC) and U.S. Bancorp (USB) are meant for people who can’t access other forms of bank credit, similar to the clients of storefront or online payday lenders.
  
  Scrutiny of the loans increased on Sept. 21, when North Carolina Attorney General Roy Cooper asked Regions Financial Corp. (RF) to provide data showing its loans don’t violate the state’s interest-rate cap. That followed a decision in May by the Federal Deposit Insurance Corp. to investigate payday-like products offered by banks, joining an inquiry by the Consumer Financial Protection Bureau.
  
  “They lend money at a high interest rate and get it paid back at the next paycheck,” Cooper said in an interview. “We want to come at this from all angles to prevent these kinds of loans in North Carolina.”
  
  The matter also has found its way into the judicial system. In August, a private lawsuit was filed in U.S. District Court in Ohio, claiming that Fifth Third Bancorp (FITB) deceived customers about the true costs of its short-term loans.
  
  Traditional storefront payday loans are secured by a check, post-dated to a borrower’s next payday. Online versions require clients to have payments directly debited from their bank account. Consumer groups have charged that the loans prey on low-income people by concealing costs and ensnaring them in an expensive debt cycle.

For more, see Banks Pushing Into Small Loans Compete With Payday Shops.