CHICAGO (CBS) — Senator Dick Durbin said today that some of the nation’s biggest banks are now offering what are essentially payday loans, with interest rates as high as 400 percent.
He’s proposing legislation to cap the annual interest rate on the loans at 36-percent, same as it is for members of the U.S military.
“If you can’t make a living as a banker with 36 percent annual interest rate, then you ought to take up some other profession,” said Durbin.
But, Durbin says, he’s a realist and he knows the legislation has no chance of passing.
“The biggest obstacle is the political power of financial institutions in Congress and in state legislature,” said Durbin.
Durbin says he’s working with regulators to step in, and he hopes the banks, themselves, will be more consumer friendly, but he’s not holding his breath.
The Consumer Financial Protection Bureau released a report this week that names some big banks that are using predatory lending practices in the form of “deposit advance” loans, which, Durbin says, are just payday loans by another name.
The banks include Fifth Third, Wells Fargo, Regions Bank and U.S. Bank.
Following the report, regulators proposed tightening the rules, including requiring an assessment of a borrower’s credit and ability to repay the loan and limiting the number of loans a person can receive.
Durbin doesn’t think that goes far enough.