This follwoing report from National People’s Action traces connections involving the biggest payday loan providers and Wall Street banking institutions, including funding arrangements, leadership ties, investments, and shared techniques. Listed here are a number of the report’s key findings:
Pay day loan organizations rely greatly on funding from big banking institutions, including
Wells Fargo, Bank of America, and JPMorgan.
* Big banks provide $1.5 billion in credit to publicly held loan that is payday,
and a projected $2.5-3 billion to your industry in general.
* Wells Fargo funds more payday lenders than just about virtually any bank that is big six regarding the
eight biggest lenders that are payday. Bank of America, JPMorgan Chase, and United States Bank
additionally finance the operations of major lenders that are payday. Bank of America and Wells
Fargo supplied critical early financing towards the payday lender that is largest, Advance
America, fueling the development associated with industry.
* Publicly traded payday loan providers paid nearly $70 million in interest cost on
debt last year – a sign of just exactly how much banks are profiting by extending credit to
* Some banks usually do not provide to payday loan providers because of risks that are“reputational”
from the industry.
Numerous companies that are payday strong ties to Wall Street.
* Two Bear Stearns executives guided the increase of payday lender Dollar Financial,
and two Goldman Sachs professionals sat regarding the company’s board when it went
* Advance America’s professionals and board users have actually ties to Bank of
America, Morgan Stanley, and Credit Suisse.
* Bank of America and its particular subsidiaries very own stakes that are significanta lot more than 1%) in
four of this top five publicly held lenders that are payday Advance America, EZCORP,
Money America, and Dollar Financial.
Payday financiers are major bailout recipients, and proceeded to give credit to
payday lenders through the entire financial meltdown and following a bailouts.
* Big banks financing major payday lenders received $105 billion in TARP funds in
belated 2008. Bank of America received $45 billion, and Wells Fargo and JPMorgan
gotten $25 billion each. Big banks proceeded to negotiate and amend credit
agreements with payday loan providers for the financial meltdown and following the
* Two lenders that are payday EZCorp and money America, utilized loans negotiated with JP
Morgan and Wells Fargo and soon after the bailouts to purchase pawn store chains
in Las Vegas, Nevada and Mexico.
Big bank funding of payday lending resulted in the increase of a industry lobby that is powerful
which includes effectively battled efforts to cap interest levels.
* a few payday lenders began dominating the industry within the belated nineties in the
power of bank funding. These loan providers formed a effective lobbying team, the
Community Financial Services Association, which includes invested $11.3 million on
federal lobbying efforts since its inception in 1999.
* Major payday lobbyists also lobby for economic institutions such as for example Morgan
Stanley, Fitch Reviews, Visa, Blackstone Group, the funds that are managed
Association, plus the Equity that is private Council. One lobbyist, Wright Andrews, was
formerly a lobbyist that is major the subprime mortgage industry.
A national interest limit of 36% would efficiently place payday loan providers away from
company, based on Advance America’s disclosure filings, but this type of limit
did not gain traction through the monetary reform process as a result of the clout of this
financial industry’s lobby.
You can find indications that the payday financing company will expand in the foreseeable future.
• Big banks such as for instance Wells Fargo, United States Bank, and Fifth Third are actually providing brand brand new
payday loan-style products. Called “checking advance” items, these shortterm
loans carry interest levels of as much as 120per cent.
• Some Wall Street analysts think that the industry will develop last year as
financially-stretched borrowers have actually increasing trouble securing charge cards.
The industry can also be predicted to carry on expanding into pawn lending and
other solutions, such as prepaid debit cards.
• Bank of America and Goldman Sachs are leading an IPO for prepaid
debit card issuer NetSpend, which lovers with numerous lenders that are payday is