Regions Bank Ends Payday Loans In NC
Regions Bank, based in Birmingham, Alabama has been using a federal banking law to provide payday lending services, even though these types of loans are illegal in North Carolina.
But the bank recently announced that it will no longer offer its payday lending service to North Carolina residents because of the small number of eligible customers for the product in the state.
Since 2001, payday lending shops have been illegal in North Carolina. But that law doesn't apply to banks that are based outside the state.
Alabama-based Regions Bank took advantage of this loophole in 2011 and extended its Ready Advance program to North Carolina residents. The program includes fees that could make for an APR of more than 300 percent depending on the number of loans taken out.
But last month, Regions Bank ended this program in North Carolina. In a statement, the bank cited a small number of customers who were eligible.
The decision is good news says Chris Kukla, senior vice president of the Center for Responsible Lending, in Durham.
"In our experience with payday lending, like every other state that's had it, is that it leads to a huge amount of repeat borrowing," Kukla says. "The average customer whether on a bank payday loan or a regular payday loan, they're paying almost two times what they borrowed."
Kukla says these loans are harmful and leave borrowers in debt for almost six months. Kukla says he hopes this sends a strong signal to lawmakers, as the payday lending industry seeks to lobby to get back in business.