Read this story by Jessica Silver-Greenberg. She reports that just as 15 U.S. states have banned payday loans, some of the world's biggest banks are playing a key role in facilitating the loans in a way that aims to evade those states' laws. Here's an excerpt:
Major banks have quickly become behind-the-scenes allies of
Internet-based payday lenders that offer short-term loans with interest
rates sometimes exceeding 500 percent. With 15 states banning payday loans, a growing number of the lenders
have set up online operations in more hospitable states or far-flung
locales like Belize, Malta and the West Indies to more easily evade
statewide caps on interest rates. While the banks, which include giants like JPMorgan Chase, Bank of
America and Wells Fargo, do not make the loans, they are a critical link
for the lenders, enabling the lenders to withdraw payments
automatically from borrowers’ bank accounts, even in states where the
loans are banned entirely. In some cases, the banks allow lenders to tap
checking accounts even after the customers have begged them to stop the
State regulators, the Federal Deposit Insurance Corporation, and the federal Consumer Financial Protection Bureau are all looking into the banks' roles in facilitating the loans (presumably with an eye toward potential regulation).
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