As far as alternatives go and the need for more clarity and transparency in disclosure agreements, the following was a key quote from a representative from Pew Charitable Trusts:

Susan Weinstock, Pew Charitable Trusts: “Unfortunately, the checking accounts in our study did not meet this standard. We found a median of 111 pages of disclosure documents…The banks often used different names for the same fee or service; put the information in different documents, different media, or different locations in a document…Many of these documents are not user-friendly, with much of the text densely printed, difficult to decipher, and highly technical and legalistic.”

We believe that CFSA’s Best Practices should be considered as a blueprint for responsible lending within the payday advance industry, and can be adopted for most short-term financial products. Provisions include: Full disclosure of fees, truthful advertising, right to rescind, appropriate collection practices, including no criminal action, and a requirement to be licensed in each state where the company does business.

“Different banks charge different fees. Different fees are applied under different terms and conditions. Different banks give different names to the very same fee,” Date said. “Ideally, consumers would have a simple way to evaluate checking account costs.”

“You don’t have some inherent right just to get a certain amount of profit if your customers are being mistreated,” he said in an interview with ABC News. “My hope is that you’re going to see a bunch of the banks saying to themselves, ‘You know what, this is not good business practices.’”

Will the CFPB be cracking down on BofA’s $5 fee? That still remains to be seen.

According to The Hill: “… no officials from the relatively new bureau have indicated the agency would be cracking down on the fee.”

“The fact remains that for the many years that I sat on this committee and considered bills concerning payday lending, the bottom line is we ask DFI every year for the number of complaints they received. There were none, none. Repeatedly year after year we could find no evidence of complaints [through] DFI. Now that has certainly changed in the last year, because now DFI reports that the Washington law that limits eight payday loans per year, now they’re turning to unlicensed Internet payday lenders and here are the complaints. Hundreds of them. Not one before the law, now all of these after the law. … Now I would rather have my constituents doing business with a licensed regulated entity that DFI can control. But we have no way of regulating out of state or out of country [lenders].”

Several stories this week have surfaced on this issue, and for a Friday we thought you might want to watch some video coverage. As mentioned in the story, the latest report out of the DFI in Washington shows that, of the licensed entities of which the DFI tracks, consumers paid $122 million dollars less in payday loan fees than they did in 2009. But what we want to know is whether or not these numbers include unregulated entities? Does the DFI accurately portray the full lending picture in Washington?

Such restrictions on payday lending would merely force consumers to use higher cost providers, some of which are unregulated and unlicensed. In the wake of the Washington state restriction, some regulators and legislators said that they have seen an increase in consumers turning to unlicensed and unregulated lenders who may operate beyond the reach of state regulators.

Unlicensed lenders are not accountable to the state either through state examination or compliance standards. DFI’s enforcement chief said that even if the agency can get a subpoena to go after an illegal lender, it’s difficult to get a response and difficult to enforce the subpoena because the lender is either out of state or in another country.[1]

In light of these simultaneous debit card rewards decreases and fee increases, the question that’s being asked: Should consumers be looking for checking account alternatives? This article encourages consumers to consider prepaid card accounts. Why? Because they are not subject to interchange fee caps and can basically serve the same purpose as a checking account.

“The surprise is, no matter how much government tries to regulate and legislate away this small loan market, it keeps coming back,” says Moebs. “People want and need a funding safety net.”

AND CONTINUED FROM THE STORY:

“Regulators should get out of and stay out of the short term money needs of consumers — they cause more problems than solutions. Instead of trying to tell consumers what they need and how to manage their money, let the market do it,” says Moebs, whose clients include banking and savings institutions.

“The huge mistake that many make when looking at overdrafts, payday loans and pawn loans, is trying to measure it by large loan standards — namely APR. It’s like bringing a baseball speed gun used to measure the velocity of a pitch to measure the speed of a college or NFL football player. Overdrafts are measured by fee amounts, not rates.”

“Removing installment loans as an option for borrowers will force them to look to black market sources or unregulated Internet lenders for the money they need. This must not happen. If Missouri must deal with payday lenders, it must do so in a significantly more targeted way.”

Payday lenders can provide a good alternative source. The small loan market… is driven by people who don’t have FICO scores high enough for a credit card.

In his analysis of the report, Main Street’s Matt Brownell concluded that…

If you need a small loan to get you to payday and you’re confident you can pay it off in time, a payday loan beats bouncing a check if you can pay the loan quickly. Just be careful.