Word on the street has it that some of the nation’s largest banks are jumping into the payday loan fray. Though not dubbed payday loans, banks such as Wells Fargo, U.S. Bank, and Guaranty Bank plan to offer short-term loans with exorbitant fees through direct deposit checking accounts and market them under names like Checking Account Advance.
Some consumers may see these loans as a way to get some debt relief. However, don’t be fooled.
Consumer advocates suggest these bank loans are as bad as traditional payday loans. They carry steep fees and establish a payback date that generally coincides with the consumer’s next paycheck.
Unfortunately, unlike payday lenders, the consumer’s bank has direct access to the consumer’s entire account information. This can be disconcerting to some consumers who have traditionally placed more trust in their bank than they ever would in a payday lender. The result is that consumers find themselves falling into the same debt trap that payday lenders are notorious for causing.
The government’s new watchdog, the Consumer Financial Protection Bureau (CFPB), is closely examining the practices of payday lenders, and is expected to keep a sharp eye on any bank that offers a similar product.
This is likely why scrutinizing payday lenders is a top priority for the CFPB. Moreover, more and more consumers – not knowing where else to turn – may be reaching out to their state Better Business Bureaus (BBB) with complaints.