American Consumer News recently reported that some payday lenders have found partners in big banks. The report revealed that major banks such as Bank of America, Wells Fargo, and JPMorgan Chase have sided with payday lenders providing them with access to borrowers’ bank accounts.
Although the banks are not responsible for offering the loans to borrowers, they let lenders withdraw payments from borrowers’ bank accounts. And in some cases these withdraws lead to overdraft charges, which cost the borrowers additional money.
State and federal officials have raised their eyebrows at these recent findings, as they begin to determine the banks’ role in these partnerships. Officials worry that these banks are surpassing individual state regulations and providing lenders access to the borrowers’ accounts in certain states where payday loans are illegal.
Meanwhile, in order to help prevent illegal practices associated with payday lending, lawmakers have sent a bill through Congress, which if it passes, will require lenders to follow the lending laws of the state where the borrower lives instead of where the lender practices.
So what does this mean for you? Well, the way payday lenders and banks operate may change in the future if this bill passes, but for now, it’s a good idea to check your state’s rules and regulations regarding payday loans to ensure that your state permits cash advance lenders.