Wells Fargo: Stop funding/operating payday lenders
The average APR for a payday loan varies from state to state, but often exceeds 400%. Nationwide, the average payday borrower ends up paying over $700 for a $325 payday loan.For a family living paycheck to paycheck with an emergency need, it can be impossible to pay back a loan in just two weeks or before their next direct deposit of benefit or salary checks. This is why 76% of all payday loans go to customers getting a new loan every two weeks. Payday lending creates an instant debt trap that can be impossible to escape.In Iowa alone, these lenders suck $36 million of wealth out of our communities annually.
Over the last 20 years, financial institutions have been promoting debt as an alternative to savings, and savings rates have dropped dramatically. Working families today have little to no savings, where 20 years ago savings rates were higher than 10%. Payday lenders use this to their advantage, marketing high cost loans as “quick” and “easy” alternatives to long-term savings.
Since at least 2002, Wells Fargo has operated revolving credit facilities – meaning lines of credit – with payday lenders across the country such as First Cash Financial and Check into Cash (2002), as well as Dollar Financial and Ace Cash Express (2003).
Within the past 10 years, Wells Fargo has led the way in financing payday lenders, funding well over $1 billion.
On top of all this, Wells Fargo is offering their own payday advance product to their checking account customers who have their paychecks direct deposited into their account. Customers may get an advance of up to $500, with a $10 fee for every $100 borrowed. This amounts to a minimum of 120% APR, assuming the customer doesn’t incur other late fees or overdraft charges.
In their own words
Wells Fargo funded payday lenders rely on Wells Fargo funding in order to bleed our communities of hard-earned wealth. Advance America states in their 2008 Annual Report that “we depend to a substantial extent on borrowings under our revolving credit facility to fund our liquidity needs, including cash dividends.” Wells Fargo “condemns the use of deceptive, predatory or abusive lending practices by anyone in the marketplace”, but continues an ongoing relationship with abusive, predatory payday lenders and engages in their own wealth stripping payday product.
The solution:
Wells Fargo must divest from storefront payday lenders like Check into Cash and Ace Cash Express.
Wells Fargo must immediately discontinue the Direct Deposit Advance payday loan product they offer.