Big Banks Moving Into “The Ghetto”

When driving down the street in an unfamiliar neighbourhood or town and see a disproportionate amount of liquor stores, fast food restaurants, and check cashing outlets offering payday loans I reflexively look to make sure that my windows are rolled up and the doors are locked. Depending on the state, I may even put my gun within reach. This is not an elitist nor racist statement, I’ve lived in these neighbourhoods. I have lived in these neighbourhoods due to necessity as well as my love of neighbourhoods with character rather than neighbourhoods flush with McMansions. I have never moved to one of these neighbourhoods in order to practice my Korean with the owners of the corner store, though I’ve learned (Korean characters here) roughly pronounced “May-Guy-Sutee-O” does indeed mean malt liquor.

Big Banks Moving Into "The Ghetto"

That being said, I rarely find myself worried about being robbed when driving or strolling past a branch of Wells Fargo & Company (NYSE:WFC), U.S. Bancorp (NYSE:USB), Regions Bank, Fifth Third Bank, Guaranty Bank or the Bank of Oklahoma. That feeling is reserved for the fees I incur when I use their ATMs or, God forbid, when I am forced to speak to a real live teller. Having read a report by the Center for Responsible Lending today, I was amazed, that is excessively strong, that the aforementioned banks are offering short-term loans at an interest rate that would make Shylock, The Merchant of Venice, blush; interest rates that give usury a bad name. Interest rates that may have made the generally mild-mannered Jesus blow up the temple rather than simply chase out the moneylenders.

In an effort to recoup billions of dollars in losses following a number of regulations restricting fees on debit and credit cards, more and more banks are looking for additional revenue streams and have found them in short-term loans. Loan providers charge interest rates that average 225 to 300 percent, according to the report.

The report, which often reads like a Stephen King novel, shows a pattern of overdraft charges and fees for insufficient funds that often quadruple the principle in many of the loans examined.

“We’re very clear that this is an expensive form of credit and not to be used as a long-term solution,” said Wells Fargo & Company (NYSE:WFC) representative Richele Messick. “We are very upfront and transparent with our customers about this service.”

“We assist our clients in better controlling his or her finances through significantly cheaper costs and with more transparency and more regulation than traditional payday lenders,” said Sheila Curley, a representative for the Bank of Oklahoma.

Given that roughly 25% of these loans are being made to Social Security recipients, I find these statements to be as hollow as a hummingbird’s bones. My grandmother can barely hear and certainly cannot read the “fine print.” How could you have explained this to her?

It is tough to be transparent in your practices when your loan recipient has cataracts.

About the Author

Brendan Byrne
While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. To contact Brendan or give him an exclusive, please contact him at