Hungry for Income, Banks Flirt With Payday Lending

Seeking new income after federal rules limited fees from overdrafts and debit cards, Wells Fargo, U.S. Bancorp, and other big banks are pitching short-term, high-cost loans that resemble the payday loans more commonly offered by strip-mall storefront operations. At least five banks are offering the loans, typically through a customer’s online account, though the banks don’t use the stigmatized “payday” label. Regions Financial, a Birmingham (Ala.)-based bank, has introduced a product called Ready Advance, while Wells Fargo markets Direct Deposit Advance. Although a rose by any other name …

Banks say they offer a lower-cost product than traditional payday loans and, unlike nonbank lenders, make sure customers can’t roll over their borrowing indefinitely. Wells Fargo limits its loans to $500, charges $7.50 per $100 borrowed, and cuts off customers who have not paid up after six consecutive loans. U.S. Bank, the banking brand of Minneapolis-based U.S. Bancorp, offers Checking Account Advance, a loan of up to $500 for as long as 35 days, according to its website. The fee is $2 per $20 borrowed.