Earlier this year, CRL released new research that refuted the claim by participating banks that their payday loan products are only for short-term emergencies and carry marginal risks. Actual borrower experiences revealed a far different experience. Instead, the typical bank payday borrower:
Is charged an annual percentage rate that averages 225-300 percent;
Took out 19 loans in 2011, spending at least part of six months a year in bank payday debt; and
Is twice more likely to incur overdraft fees than bank customers as a whole.
At that time, CRL advised, “More than 13 million older adults are considered economically insecure, living on $21,800 a year or less. Senior women in particular face diminished incomes because of lower lifetime earnings and therefore lower Social Security and pension benefits.”
Although Florida is often characterized by its large senior population, the most recently available U.S. Census data reveals that elderly poor live in many locales. More than one in five elderly residents in Boston, Chicago, Houston, Los Angeles and three of New York City’s boroughs are also poor. Nationwide, the worst concentrations of elderly poverty were found in the Bronx at 38 percent and Manhattan with 30 percent.
In its comments to OCC, CRL advised, “Though the number of banks making payday loans remains small, there are clear signals that bank payday lending will grow rapidly without strong action by all the banking regulators. . .At a time when older Americans have already experienced severe declines in wealth resulting from the Great Recession, banks take these borrowers’ benefits for repayment before they can use those funds for health care, prescription medicines or other critical expenses.”
It appears that Senators Nelson and Warren would agree.
“Left unchecked, deposit advances pose a significant credit risk to the banking system, particularly if offered by an increasing number of banks,” concluded the Senators. “In the aftermath of a debilitating financial crisis and the ensuing economic recession, it is critical that banks maintain high quality underwriting standards for all types of loans, including deposit advances.”
(Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: Charlene.firstname.lastname@example.org.)
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