Payday lending is a
sordid, predatory program which can place poor and middle class Americans in a financial death spiral.
A few major banks, Wells Fargo, US Bank, Regions, and Fifth-Third Bank, have entered the marketplace
wherein they earn 90%-300% interest rates on very short-term advances. The advances are repaid with pre-established direct
deposits such as social security checks. It is hard to believe that banks are still that irresponsible after the financial
crisis which just occured. In order to build a case to persuade the evil doers to discontinue their bad practices, Because
of their capital leverage and relatively low loan losses, their returns on equity can exceed 1000%! That is correct - 1000%!
Those banks do not disagree with this when they have been confronted with the calculations. Aquinas Associates has been working
with two of the largest "good" banks to obtain acknowledgement that they will not offer the product. Those two major
banks, Citibank and JP Morgan Chase have agreed that PAYDAY LENDING is bad for customers and stated that they will not allow
it to happen at their institutions.
While the four large "bad
banks" thought that they could get away with this sordid lending, the Office of the Comptroller of the Currency and the
Consumer Financial Protection Bureau have stepped in and declared that paday lending is a debt trap. New rules and regulations
will be issued later in 2013 on the topic.