Bryan Cohen Jul. 16, 2013, 6:30pm
LITTLE ROCK, Ark. (Legal Newsline) -- Arkansas Attorney General Dustin McDaniel met with Richard Cordray, the director of the Consumer Financial Protection Bureau, Monday to express concerns about bank deposit advance products, similar to payday loans.
McDaniel and attorneys from his Public Protection Department called on federal regulators to develop consumer protections related to the products currently being offered by six banks. The attorney general and his staff met with Cordray in Washington.
"High-interest, short-term loans often launch consumers into a never-ending spiral of debt," McDaniel said in a statement. "Regardless of what they are called and regardless of where they are offered, almost all of these products carry high fees and are offered and re-offered to borrowers, without regard to the borrower's ability to pay.
"I have successfully worked to eliminate storefront payday lending in Arkansas, and I will continue to fight against lending practices that harm consumers."
Deposit advance products carry fees of $7.50 to $10 per $100 loans and are repaid in a lump sum, typically in less than a month. The effective annual percentage rate of deposit advances are between 225 percent and higher than 300 percent.
According to a CFPB report, borrowers using deposit advance products often have to re-borrow to meet needed expenses.
Federal regulators recently expressed concern about such deposit advance products and focused on the ability of borrowers to repay loans while meeting recurring expenses.
McDaniel said rate caps are the most effective way to control issues that result from small-dollar lending practices.
"I was glad to have the opportunity to discuss with Director Cordray the successes we've had in Arkansas, as well as our concerns about these products," the attorney general said. "It is important to me and to Arkansas consumers that the state and federal government work together to ensure that loan products are safe, affordable and in compliance with both state and federal laws."
The banks currently offering deposit advance products are Bank of Oklahoma, Guaranty Bank, Fifth Third Bank, Regions Bank, US Bank and Wells Fargo.