While many believe that the economic crisis has made lending a whole lot tighter these days, there is no shortage of funds among lenders of bad credit loans, making this particular type of loans a lot more accessible for credit consumers. This is according to a report from the National People’s Action and the Public Accountability Initiative.
The report, dubbed “The Predators Creditors,” reveals that the bad credit loan industry is backed by the biggest banks and financial institutions in the US, and is in fact the reason why the industry of bad credit loans, more commonly known as payday loans, has experienced an unprecedented growth since its launch. The continuous financing of these banks has also fuelled the growth of the industry.
Wells Fargo & Co, the Bank of America Corp, and JP Morgan Chase & Co. are three of the largest banks in the US reported to have lent support to the industry of bad credit loans. According to a report by Nathaniel Popper of the LA Times, “Major banks led by Wells Fargo & Co, US Bancorp and JP Morgan Chase & Co. provide more than $2.5 billion in credit to large payday lenders.” Along with the financing that these banks provide to the industry, it is also reported that they have started to offer loans that resemble bad credit loans, offering high-interest loans on their own. In particular, the new, short-term, checking advance loans offered by banks can have interest rates of as high as 120%.
Consumer groups have continued to attack the industry, saying that taking out payday loans only lead credit consumers to a financial trap that can be difficult to get out of. The coauthor of the said report and Public Accountability Initiative director, Kevin Connor, said “Not having financing would shut the big players down.”
Bad Credit Loan Industry Seen to Grow
But while continuously attacked by various groups, payday loans remain a great choice for credit consumers. Steven Schlein, Community Financial Services Association spokesman, slams reports about the misleading relationship between banks and payday lenders, saying that “[p]ayday loans companies are in fact good creditors because their customers are good creditors. He adds, “Payday loans are a valuable service to millions of American consumers that have short-term financial needs.”
With billions of dollars of financing offered by these giant banks, there is no wonder why the industry is booming, and is thus anticipated to expand in the coming years. And in response to all the negative, and probably misleading, write-ups and reports about the industry, government agencies have started to initiate rules and regulations, such as the provision of a national cap on payday loan interest rates, in order to protect consumers of bad credit loans.