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November 19, 2008 | Motley Fool, Ohio, alternatives, industry, media coverage, states | Comments (1)The Motley Fool exposes how banks are reaping a windfall from Ohio payday lending ban:
Fifth Third Bancorp
Is there a link between the availability of payday lenders in a state and the amount that banks collect on overdraft fees? I’m not sure, but CAPS member Robermac suggests there is and notes that with payday lenders on the ropes in the Buckeye State as a result of a legislative defeat, regional banks such as Fifth Third stand to reap a windfall as a result:
Payday lending was defeated in Ohio and many payday lenders will close their doors. This will allow the fees collected by banks to skyrocket. Fifth Third bank is the largest regional bank with the most branches located in Ohio. When a [similar] law [passed] in [Georgia] a few years ago the regional bank gained [from] increased fees from bounced checks.
Here are some details of Fifth Third banks’s payday lending “alternative.”
TERMS:
· Credit limit is based on total of monthly direct deposits (maximum of $500 or half of total monthly direct deposits-whichever is less).
· Fee is $1 per $10 borrowed
· A payment towards the advanced amount and fee is automatically made when the bank receives your next direct deposit. The bank will pay off any balance owed, up to the deposited amount, on the day of the deposit. If the advance is not paid in full prior to 35 days after the advance, the remaining balance will be deducted from the checking account.
The advance is paid automatically from the customer checking account when the next direct deposit hits the account, making the loan term anywhere from 1 to 35 days. The APR varies greatly based on the loan term, ranging anywhere from 3,650% to 104% APR. To actually receive a 120% APR loan, the APR quoted on the site, the loan term would fall between 30 and 31 days. The bank takes on little, if any risk, by offering these loans, because they have direct access to the customer checking account the moment the direct deposit comes in to the account.
Comments»
Unbelievable, truly unbelievable.