(NNPA)—In today’s challenging financial times, the cost of living finds many consumers with an ongoing financial challenge to hold on until their next payday arrives. Even worse, when banks peddle predatory payday loans, they pose serious threats to their customers’ financial well-being. Marketed under names such as “direct deposit advance,” these loans are easy to get; but hard to pay off. As consumers get ensnared by the debt trap, banks reap repeating cycles of quick cash.
In its latest report on bank payday lending, the Center for Responsible Lending (CRL) found that although participating banks claim that their payday loan products are only for short-term emergencies and carry marginal risks, the real-life experiences were the opposite. In fact, the typical bank payday borrower:
•Is charged an annual percentage rate (APR) that averages 225 to 300 percent;
•Took out 19 loans in 2011, spending at least part of six months a year in bank payday debt; and
•Is twice as likely to incur overdraft fees than bank customers as a whole.
In addition, more than one in four bank payday borrowers is a Social Security recipient. This comes on the heels of a key administrative change for seniors on Social Security. As of March 1, all Social Security payments are issued electronically. And although seniors have specific protections from payday lending on prepaid cards, no comparable protection exists on checking accounts.