After a campaign by consumer advocates and state leaders, a bank dropped its harmful payday lending program in North Carolina.
Payday loans have been illegal in North Carolina for more than a decade, but that hasn’t stopped all payday lending. For the past year, Regions Bank has used federal banking law to offer payday loans that are illegal for any other lender to make in our state. These loans carried, on average, an annual percentage rate (APR) of 365 percent. Now, after significant pressure from consumer advocates and the state Attorney General’s office, Regions has quietly dropped its payday lending program for North Carolina customers.
“The people of North Carolina and the North Carolina legislature have consistently said they do not want payday lending in our borders,” said Chris Kukla, Senior Vice President at the Center for Responsible Lending (CRL). “We’re glad that Regions Bank has decided to stop thumbing its nose at our North Carolina laws and has dropped this product in our state.”
North Carolina citizens are strongly opposed to illegal payday lending. A poll conducted last September by Public Policy Polling on behalf of CRL found that 93 percent of respondents were less likely to use a bank that makes payday loans that violate North Carolina law. North Carolina limits the APR on loans under $10,000 to a maximum of 54 percent.
In recent months, Regions has faced criticism from consumer advocates, the state Attorney General’s office, and the N.C. Legislative Black Caucus for offering payday loans. The North Carolina Coalition for Responsible Lending, which represents nearly 200 groups with three million members, has actively opposed these illegal loans. In October, dozens of consumer advocates and concerned citizens staged a demonstration at a Regions Bank branch in Raleigh.
“This is a victory for all North Carolina consumers,” said Jeff Shaw of the North Carolina Justice Center. “Especially in the wake of the bad lending that led to the financial crisis, banks should understand that the last thing we need is destructive loans that drag cash-strapped families down even further.” Payday loans have long been documented as a predatory financial product that traps customers in high-cost debt. Lenders call this loan product by different names, but it is functionally the same thing as a payday loan, with extremely high APRs in combination with short-term due dates, creating a cycle of debt. Research by CRL shows that bank payday borrowers averaged 175 days of the year in debt, and one quarter of bank payday borrowers are Social Security recipients.