Marketed as a way to help consumers pay the bills until their paychecks arrive, payday loans trap consumers in terrible cycles of debt, dragging their families more deeply into financial crisis. In return for a loan the consumer provides the lender a post-dated check for the amount borrowed plus a fee. The check is held for one to four weeks (usually until the customer’s payday) at which time the customer redeems the check by paying the face amount or allowing the check to be cashed. Payday lenders encourage their customers to get on a debt treadmill by refinancing one payday loan with another. The fees for payday loans are exorbitant with effective interest rates that can top 1,000 percent.
The repeal of usury laws has allowed payday loans and other predatory lending to flourish.
Policy Briefs, Reports & Press Releases
- Group press statement applauds Dept. of Defense report to protect servicemembers from high-cost credit, June 2, 2014
- Press release: Supreme Court Decision (Michigan v Bay Mills Indian Community) Strikes Blow against Tribal Online Payday Lenders, May 29, 2014
- Press release: Four Oaks Bank slapped for aiding illegal payday lending, April 25, 2014
- Bank Payday Loans Gone! Guidelines for Affordable Small Dollar Loans press release and issue brief, January 30, 2014
- Press release: OCC, FDIC curb bank payday loans, Nov 22, 2013
- Issue Brief: Keep Prepaid Cards and Credit Separate, July 2013
- Press Release: Credit Union Payday Lending Down But Not Out: NCUA Asked to Address Triple-Digit Payday Loans, May 16, 2013, Issue Brief and Letter to NCUA
- Report: Why 36%? The History, Use, and Purpose of the 36% Interest Rate Cap, April 2013, Issue Brief and Press Release
- Press Release: Urban Trust Bank Halts Overdraft Fees on Payday Lender Prepaid Cards, Feb. 1, 2013
- Press Release: Tandem Money Prepaid Card Payday Loan/Savings Product Folds, Nov. 9, 2012
- Press Release: Banking Regulator Slams Urban Trust Bank, Issuer of Prepaid Card Payday Loans: OCC Finds Legal Violations and Unsafe Banking Practices, Sept. 24, 2012
- Press Release: Advocates Urge CFPB to Ban Overdraft Fees and Payday Loans on Prepaid Cards, July 25, 2012
- Press Release: Comments to NCUA on Payday Lending by Credit Unions and CUSOs, Sept. 26, 2011
- Issue Brief: 300% Bank Payday Loans Spreading, August 2011, Press Release, Group Comments, Sample Comments to the Federal Banking Regulator (OCC) Opposing High Overdraft Fees and 300% Interest Bank Payday Loans, August 8, 2011
- How Mississippi Municipalities Can Protect Their Residents from Payday Lending, Dec. 16, 2010
- Put Your Money Where the Shark's Mouth Isn't: Loan Options for Mississippi Borrowers That Are Better Than Payday Loans, by Leah A. Plunkett and Lauren K. Saunders, December 1, 2010
- Press Release: NCLC Applauds End of 650% MetaBank Prepaid Card Payday Loan - Other Regulators Should Follow OTS Action Against Similar Bank Payday Loans, October 14, 2010
- Runaway Bandwagon: How the Government’s Push for Direct Deposit of Social Security Exposes Seniors to Predatory Bank Loans Report, July 2010
- Report Exposes Expense and Pitfalls of Some Payday 'Alternatives': Stopping the Payday Loan Trap: Alternatives that Work, Ones that Don't, June 2010
- Small Dollar Loan Products SCORECARD - Update: Scorecard Shows Consumers Pay Steep Rates for Small Loans, May 13, 2010
Press Release and Statutory Backup
- Press Release: Bank Payday Loans... They're Baaaack: 650% APR Loans on Prepaid Cards and Bank Payday Advance Loans Flout State Interest Caps and Protection, June 2009
- Coalition letter to CFPB re: proposed payday lending rules to better protect consumers, Oct. 23, 2014
- Letter to House of Representatives supporting Operation Choke Point and other work against payment fraud, July 15, 2014
- Letter to Senate urging support for Operation Choke Point and other efforts against payment fraud, June 18, 2014
- Letter to CFPB urging a strong rule on payday loans, March 28, 2014
- Letter to DOJ applauding work against payment fraud (including illegal payday payments), Jan. 14, 2014
- Press Release and Group letter to the regulators to push for stronger measures to stop illegal payments from being taken out of consumers' bank accounts, October 24, 2013
- Group letter to the Office of the Comptroller of the Currency (OCC) opposing Urban Trust Bank partnering with Community Choice Financial Inc. and its subsidiaries to facilitate payday loans on prepaid cards in circumvention of state law and OCC's reply. OCC-Urban Trust Bank Agreement, July 2012. Related materials: legal analysis and press release.
- Group letter to members of U.S. Congress urging support of legislation that protects consumers from payday and online lending and empowering states to enforce credit protection, April 26, 2012.
- Consumer letter to Congress on dangers of internet payday lending, May 11, 2011
- NCUA Letter Highlights Dangers of False Credit Union Payday Loan "Alternatives", July 30, 2009
- Letter opposing preemption of Arkansas usury rate, May 18, 2009
- Support letter for S. 582, Interest Rate Reduction Act, March 27, 2009
- Letter opposing payday loan bill, H.R. 1214 (Gutierrez), March 23, 2009
- Letter in support of S. 500 (Durbin), establishing 36% national usury cap for all credit, March 2, 2009
- Letter to NCUA about credit unions engaged in high cost lending, Jan. 27, 2009.
- Comments to Department of Defense on limitations on terms of consumer credit extended to service members and departments, Dec. 23, 2014
- Comments to California on the role of electronic payments, remotely created checks and prepaid cards in making payday loans, May 19, 2014
- Comments urging Fed to ban remotely created checks, Dec. 13, 2013
- Joint comments on the Department of Defense's rulemaking to expand scope of Military Lending Act, August 1, 2013
- Comments to FDIC and OCC supporting guidance to rein in bank payday loans (May 30, 2013): Consumer coalition comments. NCLC comments focused on prepaid card payday loans.
- Center for Responsible Lending and NCLC comments to the Office of the Comptroller of the Currency re: Wells Fargo payday lending should negatively impact the lender's upcoming Community Reinvestment Act evaluation, Nov. 29, 2012.
- Comments to NCUA on changes to small dollar loan regulations, November 26, 2012
- NCLC Comments and shorter Coalition comments to CFPB re: Proposed Rules for General Use Reloadable Prepaid Cards (Electronic Fund Transfers (Regulation E), 12 CFR Part 1005, July 23, 2012 Press Release.
- Comments on Interim Final Rule permitting direct deposit of Social Security and other federal payments to privately selected prepaid cards, Apr. 25, 2011
- Comments on NCUA proposed rule raising federal credit union usury rate for small loans, July 6, 2010
- Federal Credit Union Usury Rates for Payday Loan Alternatives - July 6, 2010 deadline to comment on the NCUA’s proposal to raise to 28% plus a single $20 application fee the rate that federal credit unions may charge for short-term, small amount loans. Sample comments.