Big Banks Getting Into Payday Loans
Despite growing pressure for more regulations, big banks are getting into payday loan type of products to steal a chunk of the $35 billion dollar a year industry. Banks like Wells Fargo and US Bankcorp are throwing their hats into the ring in hopes of generating additional revenue and will be marketing their triple digit APR products to their own checking account customers.
Some of the consumer watchdog groups are crying foul at this move as they believe the high interest rates and tactics used to market payday loans products would skirt state laws and enable banks to sell these products even though they could be harmful to some people.
However, others see this as a legitimizing of an industry that has been flooded with tons of bad press and political debates. Big banks represent what is suppose to be legitimate finance practices and since they are willing to get into the industry, it makes the products appear to be more upfront and reliable than critics have eluded too.
Does this mean the payday loan industry has finally hit its stride, and will we see more of these products marketed in traditional ways, as well as continue to grow now that the big banks are getting into the act? This remains to be seen, but what is obvious is that the big banks are looking at some opportunities to make more money and they are in the industry to stay.
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6 Comments to 'Big Banks Getting Into Payday Loans'
September 22, 2009
What scares me the most about this is that if you fail to pay a loan back you are totally in the weeds. There’s nowhere to hide if you took a payday loan from the company that holds your money for you.
On the other hand, these loans may be able to be used to improve the credit scores of those that have bad credit. It seems like they’re still testing these out, so we’ll have to wait and see.
Good post!
September 23, 2009
If this is true, I would say this will end up being as bad as the mortgage fiasco! Buyer beware for sure these days.
September 24, 2009
My guess is once big banks start exploiting this industry this is when you will see more regulation limiting payday loans.
September 27, 2009
This definitely has it’s problems–I know that with US Bank when you are in your online account the option for a payday loan is right there, very easy access. While this is convenient, it also just makes it that much easier for people to get in over their heads.
I don’t think you can blame the banks, though. I think payday loans fill a space in the loan industry not covered elsewhere, and until a better solution is found, they are here to stay. I just wish people were better informed about how easy it is to get into a payday loan cycle, it’s the easiest way to spiral into debt I can think of.
September 28, 2009
I agree with one touch glucometer, when the banks see something worth getting into, they look to monetize it to until its drained of all its blood. Buyers beware is an understatement.
January 28, 2010
Yeah. I think its still an experiment. Whether it will work or not I still don’t know. I’m afraid to try it cause if you can’t pay it you might end up in jail. I don’t know.
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