Monday, February 27

Hall of Shame: CFPB Finds Half of Online Payday Borrowers Rack Up an Average of $185 in Bank Penalties

The job of the most honest seller is to sell you, not to give you reasons to buy from a competitor. That over-riding reality drives the free-enterprise system, and places a responsibility on you.

FoolProof's Hall of Shame is here to remind you why a healthy dose of skepticism should rule your decisions before dealing with anyone who wants to touch your money or your general welfare.

April 20, 2016

Payday Loans

The Consumer Financial Protection Bureau (CFPB) issued a report that found that attempts by online lenders to debit payments from a consumer's checking account add a steep, hidden cost to online payday loans. Half of online borrowers rack up an average of $185 in bank penalties because at least one debit attempt overdrafts or fails. And one third of those borrowers who get hit with a bank penalty wind up having their account closed involuntarily.

"Taking out an online payday loan can result in collateral damage to a consumer's bank account," said CFPB Director Richard Cordray. "Bank penalty fees and account closures are a significant and hidden cost to these products. We are carefully considering this information as we continue to prepare new regulations in this market."

Source: www.consumerfinance.gov

Specifically, the report found:

  • Half of online borrowers are charged an average of $185 in bank penalties
  • One third of online borrowers hit with a bank penalty wind up losing their account
  • Repeated debit attempts typically fail to collect money from the consumer