Watch out for banks offering payday loans
According to a report from the National Consumer Law Center, supposedly respectable banks are now offering payday loans.
Of course, they don't call them payday loans, because of the horrible connotation that carries.
The loans are given clever marketing names such as "Early Access" or "iAdvance" and peddled to customers whose paychecks are directly deposited into their checking accounts.
The bank agrees to put however much money a customer needs directly into their account and then repays itself when the next deposit of $100 or more is received.
The law center says banks pushing this service, including U.S. Bank, Wells Fargo and Fifth Third, are charging $2 for every $20 borrowed.
That works out to an annualized percentage rate of 240% for customers who are paid semimonthly and take the advance a full 15 days before payday.
The cost jumps to 521% APR for customers who get the money just seven days before they're paid.
Whatever the bank may call them, the law center says, "These advances are payday loans, plain and simple -- triple digit loans repaid on the next payday."
The law center found that industry consultants are recommending banks offer these loans as a way to replace the income they're losing because of new laws and regulations intended to protect consumers from unscrupulous bank fees.
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