Regions Bank announced today that it will no longer be offering triple-digit-interest payday-style loans. That’s very good news for consumers in the 16 southern and midwestern states where Regions operates. It’s one more step towards the end of a type of lending that is no less destructive when it’s practiced by a bank instead of a storefront.
Last year, two major federal regulators, the Federal Deposit Insurance Corporation (FDIC) and the Office of Comptroller of the Currency (OCC), effectively banned payday lending by the banks they oversee. But the Federal Reserve failed to take equally strong action, leaving it unclear how the banks it regulates, including Regions and Fifth Third, would respond.
A Regions spokesperson said today’s announcement was “based on a number of industry factors that have emerged since we introduced the product in 2011.” In late 2014, thousands of people – including grassroots activists from National People’s Action and AFR – signed petitions asking Regions to get out of the payday loan business. The petitions were delivered to the bank’s Alabama headquarters, while community groups held protest rallies at Regions offices in Illinois, Missouri and Iowa. The petitioners and protestors called on the company to drop its “Ready Advance” loans, which came with a $2 cash advance fee for each $10 borrowed – fees that worked out to the equivalent of more than 300% annual interest for customers who, typically, would roll one loan over into the next over a period of months.
Regions said today that it would stop making new Ready Advance loans immediately, and phase out the product entirely by the end of 2014. We urge Fifth Third to do the same.