Payday Lenders Get Help from Big Banks

Posted On: September 15, 2010 at 12:44 p.m.

Filed Under: citigroup major banks payday loan

As the economy works its way out of the recession, banks are still reluctant to help many small businesses and homeowners acquire loans. However, they have continued to help the payday loan industry, an industry that continues to do well in tough financial times. “”Not having financing would shut the big players down,” said Kevin Connor, a coauthor of the report and a director of the Public Accountability Initiative, a nonprofit research group that has been critical of big business. [[ads]]

Some major banks have shied away from doing business with payday lenders because of concerns about their practices or about the sector’s image.

“Certain banks have notified us and other companies in the cash advance and check cashing industries that they will no longer maintain bank accounts for these companies due to reputational risks and increased compliance costs,” Advance America, the biggest payday lender, wrote in a regulatory filing.

Citigroup Inc., for example, says it doesn’t lend to the industry. Bank of America Corp. has financed some payday lenders but tries to avoid doing so, applying a stricter-than-usual screening process when they apply for credit, said Jefferson George, a spokesman for the bank” (http://www.latimes.com/business/la-fi-payday-banks-20100915,0,6194808.story). This makes me wonder what the screening process is for payday lenders, if it is that much more strict.