There has been recent news in the industry that cites the wrong way these loans are being used and the steps being taken to restrict their proliferation.
The Huffington Post reports that Federal regulators are beginning an investigation into banks which, though not heavily advertised, offer in-house payday loans. Along with a checking account, this payday loan service is being expanded by the banking industry.
In a speech to a lobbying organization, FDIC chairman, Martin Gruenberg, has stated that the FDIC is deeply concerned about the growing use of payday loans by the banking industry and their expansion in banking.
Because the loans are not heavily advertised, and the banks claim that they are designed to help their customers in an emergency, these advance deposit loans go unnoticed as payday loans. However, interest rates that are high and balloon payments make them very similar to loans that are being regulated at the present time throughout the payday loan industry.
Many cities are now restricting the increasing number of store front payday lending companies; San Jose, California, is now the largest of the cities that has added restrictions and set limits on the growing number of these businesses. It has even become an issue of political importance, as other cities attempt to restrict the growing stores.
In regards to the payday loan store front, one former employee of a large company that specialises in payday loans has mentioned that many customers repeatedly use the loans by paying off the loan and taking a new one immediately. This debt cycle can go on for many years and, although it makes money for the company, is harmful for the economic stability of the customer.
It is hoped that stronger protection for the consumer and such investigations will be of significant benefit.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk