Difference Between Payday Lenders and Banks? Not Much

What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

A government study finds that banks' deposit advance products frequently trap consumers in a cycle of debt just as payday lenders do.

Deposit advance loans offered by a growing number of banks share the same loose lending standards, high costs and risk that payday loans have, says the Consumer Financial Protection Bureau.

The agency this week released an analysis that examined a year’s worth of payday loans (more than 15 million) alongside data from banks that offer deposit advance products. One of the biggest differences between the two is the name.

The CFPB says they are “similar in structure, purpose, and the consumer protection concerns they raise.” Both are pitched as a way to get by between paychecks. Both offer easy access to quick cash for people with poor credit. Both are small loans that must be repaid quickly.

And both banks and payday lenders generally fail to consider the borrower’s ability to repay. Instead, they just guarantee they get their money back: Payday loans require a personal check or authorization to debit a checking account, while banks just suck the payment out of the next qualifying deposit you make.

Since repayment is usually required from the next available paycheck in either case, the borrower then often needs to take on another loan, especially because of the fees for the loans, the CFPB says. They’re typically $10 per $100 for banks and up to twice as high for payday lenders. The average loan term with payday lenders is 14 days, and with banks it’s 12 days.

Payday borrowers remain indebted to their lenders for a median of 199 days or 55 percent of a year. At banks, it’s more than 40 percent of a year. Sixty-five percent of deposit advance users also end up paying overdraft fees, the report said.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: Considering a Fixer-Upper? 15 Ways to Avoid a Money Pit

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,968 more deals!