The American Bankruptcy Institute and the Washington Post reported that the Center for Responsible Lending recently found that some of the nation’s largest banks are providing short-term loans with interest rates of up to 300 percent, driving borrowers into a cycle of debt. This only perpetuates America’s debt culture and could increases the potential for consumer bankruptcies. The study was released yesterday (3-21-13) and surveys the advance-deposit loan programs offered by Wells Fargo, U.S. Bancorp, Regions Bank, Fifth Third Bank, Guaranty Bank and Bank of Oklahoma. Account holders typically pay up to $10 for every $100 borrowed, with the understanding that the loan will be repaid with their next direct deposit. If the deposited funds are not enough to cover the loan, the bank takes whatever money comes in, triggering overdraft fees and additional interest. Banks contend that they are offering a vital service to customers at more reasonable price points than storefront lenders, who often charge twice as much as banks. The Consumer Financial Protection Bureau has supervisory and enforcement authority for storefront and bank payday lenders with more than $10 billion in assets. Read more.
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