Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.

With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.

While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals…

The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are examining banks’ roles in the online loans…Benjamin M. Lawsky, who heads New York State’s Department of Financial Services, is investigating how banks enable the online lenders to skirt New York law and make loans to residents of the state, where interest rates are capped at 25 percent.

For the banks, it can be a lucrative partnership…Some state and federal authorities say the banks’ role in enabling the lenders has frustrated government efforts to shield people from predatory loans — an issue that gained urgency after reckless mortgage lending helped precipitate the 2008 financial crisis.

While the loans are simple to obtain — some online lenders promise approval in minutes with no credit check — they are tough to get rid of. Customers who want to repay their loan in full typically must contact the online lender at least three days before the next withdrawal. Otherwise, the lender automatically renews the loans at least monthly and withdraws only the interest owed. Under federal law, customers are allowed to stop authorized withdrawals from their account. Still, some borrowers say their banks do not heed requests to stop the loans…

While there are no exact measures of how many lenders have migrated online, roughly three million Americans obtained an Internet payday loan in 2010, according to a July report by the Pew Charitable Trusts. By 2016, Internet loans will make up roughly 60 percent of the total payday loans, up from about 35 percent in 2011, according to John Hecht…

Facing increasingly inhospitable states, the lenders have also set up shop offshore. A former used-car dealership owner, who runs a series of online lenders through a shell corporation in Grenada, outlined the benefits of operating remotely in a 2005 deposition. Put simply, it was “lawsuit protection and tax reduction,” he said. Other lenders are based in Belize, Malta, the Isle of Man and the West Indies, according to federal court records.

Screwing the working poor is just as important to these thugs as screwing the middle class.



  1. Fabby says:

    Don’t borrow money from Al Capone or you’ll get your knee caps shot!

  2. orchidcup says:

    Screwing the working poor is just as important to these thugs as screwing the middle class.

    When you are offered the opportunity to be screwed, you are capable of declining the offer.

    Apparently there are roughly three million Americans that are incapable of understanding the terms of a loan agreement.

    Lending corporations have the ability to operate around state laws because of their status as legal persons.

  3. Pocono Charlie says:

    I don’t know, it seems to me that ‘Caveat emptor’ is the rule of the day. If you’re of legal age, and you enter into a loan like this, you ought to know what you’re doing.

    Same as the mortgages that were promoted (a lot!) by the government: if you loan to untrustworthy individuals, you wind up with a lot of foreclosures.

    • So what says:

      The key is ought to know. What was it P.T. Barnum used to say?

      Come to Missouri for the meth stay for the pay day loans.

  4. Admfubar says:

    time to dump banks…. start using credit unions…

  5. Egon Ruuda says:

    Are you serious? If you live by the loans, sure. But payday loans has actually helped people in a one month slump/problem. If they allowed fair competition instead the rates would be lower and the terms would be more acceptable.

    • orchidcup says:

      Lending money is not an altruistic endeavor. If you need temporary help, find a relative that trusts you to repay a short-term loan.

      Lending corporations are obviously not interested in fair competition when they purposefully locate themselves outside of legal jurisdictions in order to circumvent state usury laws.

      If you don’t wish to be eaten by the sharks then don’t swim in their waters.

  6. dusanmal says:

    Missing from the Progressive mindset, the term “personal responsibility”. Laws and Government should not protect you from your own poor judgment after the age of 18.

    • orchidcup says:

      A case in point is the application of alcohol consumption laws in the state of Texas.

      A person that serves alcohol to a consumer is required to take a test and obtain a permit to serve alcohol.

      The server test requires knowledge about blood alcohol levels and knowing when a person is inebriated to the point where service must be suspended.

      The server is responsible under law if a person leaves an establishment under the influence of alcohol and kills someone because of their negligence.

      The alcohol server laws are ass-backwards.

      It is the consumer of alcohol that should be required to take a test and obtain a permit to consume alcohol.

      Then the personal responsibility rests with the consumer and not the server.

      The server should not be responsible for the behavior of someone else.

  7. George says:

    There is no justification for preying on the poor and disadvantaged. While the law recognizes the right of people to enter into a contract, it supposes that the parties do so under their own will, and consent without coercion. People that are penniless are not completely without coercion. Walking away from the deal is unlikely when it is the only deal they have.

    Banks seem to be complicit in this by denying accounts to people with poor credit and work histories, then they turn around and prey on these same people through subsidiary corporations who offer these horrible financial products.

    We should be ashamed of what has happened to America. Like in Frank Capra’s “Its a Wonderful Life”, we are quickly turning into one great big “Pottersville”.

    • msbpodcast says:

      While the law recognizes the right of people to enter into a contract, it supposes that the parties do so under their own will, and consent without coercion.

      And that is why, as Dickens said: The law is an ass.

    • orchidcup says:

      People that are penniless are not completely without coercion.

      People that are penniless cannot repay a loan.

      Coercion is not a factor.

      • msbpodcast says:

        If you’ve got no food until you pay gets cashed and your kid is hungry now, you’re coerced by circumstance.

        It doesn’t matter that you’re new to poverty, or you wouldn’t have had the kid. (Lots of people saw their savings evaporate in 2008 and they’re never getting that money back. Lots more people didn’t really have net savings in the first place.)

        It doesn’t matter that you suddenly had a blowout on the highway and had to spend you cash on your tires instead of groceries, or you weren’t getting any further.

        It doesn’t matter that you got sick for a week and have no cushion left.

        These pricks prey on people and justify it like Tony Soprano: Its nothing personal. (And then he plugged Salvatore ‘Big Pussy’ Bonpensiero full of lead.)

        And right in the line for their slice of the misery pie are the allegedly big banks, lending money to those mark-up cock-/blood-suckers.

        • orchidcup says:

          Regardless of your feelings about predatory lenders, the lending industry is not in business to help people that are in dire straits and need assistance.

          These pricks do not prey on people, the people come to them voluntarily.

          If you got sick for a week and you have no cushion left, find a different solution.

    • Ken says:

      So it’s wrong to coerce people who are willing to enter a contract in order to do something that they deem beneficial to themselves, and therefore it’s right (ie. moral) to prevent them from doing so by means of violent coercion.

      Tell me, by what objective principle do you define your morals, or is it just that your elitist attitude regarding people guides your subjective moral demand that beneficent rulers deem what is right and wrong for those people?

  8. msbpodcast says:

    What is at issue here is not the morality of Payday Loans, (which are shady and dubious at best. [Christ chased them from the temple and they were summarily executed by Mohamed. {The opprobrium aimed at extortionists is universal, wether they're lending you money at extortionist rates or renting time at your sister's orifices.}])

    Instead its that the Big Banks, which we spent billions of dollars bailing out, are colluding with the dubious extenders of these Payday Loans, instead of competing with them.

    The banks are proving once again that they have the morals and ethics of gutter snipes and rats in heat.

    They do anything and everything for the almighty buck.

    Stalin may have been a paranoid schizophrenic and a complete and total prick, but he was right about some things: “When we hang the capitalists they will sell us the rope we use.

    • orchidcup says:

      We can see how well Communism worked for the former Soviet Union.

      • msbpodcast says:

        Actually, the Soviet Union never used communism as their economic system.

        Their statist control system was always supposed to be evolving towards communism. (Though with leaders like they had, it was not going to evolve too much or too far.)

        Their statist system was for shit. At best it was Nazism without the Krupps. (Not that they’re that much worse off than we’re becoming.)

        • MikeN says:

          Insanity is repeating the same thing over and over again and expecting a different result.

    • msbpodcast says:

      Sorry, money at extortionist rates should have read money at usurious rates.

      • orchidcup says:

        I will take this opportunity to offer you a loan of one United States Federal Reserve dollar for the term of one month.

        At the end of the month, you must repay 20 United States Federal Reserve dollars and a penalty of 2 dollars for every day you are late with your payment.

        I await your response.

        • msbpodcast says:

          I am fortunate in not requiring your one United States Federal Reserve dollar.

          Snort coke with it for all I care…

          • orchidcup says:

            I see that I cannot force you to take my offer.

            This is your last opportunity take my offer. If you do not take my offer, I will snort coke with my one United States Federal Reserve dollar.

          • Gwad his own self says:

            How about this one:

            You are at sea, and your boat sinks. You are treading water and have no life jacket.

            I come along in my boat and offer to loan you one of my life jackets at the rate of one thousand dollars a minute. It is not my fault that you are adrift, nor are you required to accept my offer. It’s possible that another boat will come along later with a more generous skipper. Or not.

            Oh, I should mention that my cousin built the boat that you were sailing in, and he assembled the boat using scotch tape and used packing crates, although at the time you bought it, it had been freshly painted and looked seaworthy.

            What do you do? WHAT DO YOU DO?

            I don’t care either way. (FY, IGM).

  9. orchidcup says:

    How about this one:

    You are at sea, and your boat sinks. You are treading water and have no life jacket.

    I would not go without a life jacket.

    • Gwad his own self says:

      Your bought your life jacket from someone you trusted but it turned out to be made out of tissue paper and snot.

  10. MikeN says:

    500% interest rate is 1% a day. Borrowing $300 would mean you are paying a few bucks a day to tide you over until the next paycheck.

    People who are saying this is predation of the poor who shouldn’t be taken advantage of, then you should first look at what the welfare system does to people, keeping them hooked on a lifestyle of dependence.

    • Gwad his own self says:

      Maybe they’re just hooked on eating and breathing.

      • Bob says:

        Maybe, we know different welfare recipiants. All, and yes I mean ALL, the ones I know of are in their situation due to their own bad decisions. More over, instead of using the welfare system as a temparary safety net, they live off of it. In most cases not even trying to find a job.

        More over, and this is what really bugs me, their is no shame in what they are doing. If you are going to stick your hand out and take from someone else their really should be some shame. At the very least it would motivate you to do better. Not any more. Now being a welfare broodmare is actually considered, if not honorable, then not something to look down on.

        In the end this country is screwed.

  11. MikeN says:

    So are the big banks this week’s two minute hate?

    Have you apologized for the lies told at your last two-minute hate?

    http://forbes.com/sites/gracemarieturner/2013/02/25/how-sensationalist-claims-undermine-responsible-federal-budgeting/

  12. One day I may understand this all before i die