Everyone has come across a time where they needed some extra money. Whether they got behind on a payment or needed extra money for an emergency, we have all been there. A few of us have even taken out payday loans. In the past, this has been the domain of pawn shops and loan operations. These operations were the only option for people in cash pinch until recently. Republic Bank, which I represent, has recently entered into the field of payday loans. Obviously people do not want to be in the position of needing extra money, and many people do not like the idea of turning to the local pawn shop to secure extra funds. We are curious to find out the perception of securing a payday loan from a bank. Keep in mind that Republic Bank must follow some more stringent guidelines than most of these operations. Also, as a bank, Republic is used to processing and securing peopleâ??s sensitive financial information. So our question is, if you have to take out a payday loan, would you want to turn to some company that focused on it, a pawn shop, or the same service backed by a bank or would you simply be against the idea of a payday regardless of the institution backing it? For more information please visit www.republicbankpayday.com
As an example, thru your payday loan product, what would it cost your customer in fees and interest, to borrow $1000 for a total of 1 year?
Currently, the payday loan industry has a record of predatory lending, excessive equvalent APR (typically greater than 400% annual rate), and tends to pull their customers deeper into debt. About all you can say is that, compared to the local loan shark, they might not break your legs. Why are you different, and if you are marketting a loan product secured by a future wage payment or income stream, why would you market it as a payday loan? BBB has no record of your URL. What is your brick and mortar address?
Payday loan companies advertise themselves at the light at the end of the tunnel. What they never advise is that the tunnel only gets longer, darker, and begins to go downhill after that. My state has already passed a law restricting business practices of small lenders and short-term lenders. Small loans with outrageous rates are a recipe for financial disaster when pitched to consumers looking for a quick fix. While I agree with the whole "free enterprise" idea, I do not like the idea of predatory lending and the devastation it has been known to cause.
I thought they were fair questions. If I were on the board of any normal bank, I would ask the same of any marketing VP proposing getting into that business. I would also ask what would this likely do to the value of our brand-name, and our business relationships with current customers? Banks work so hard to establish the perception in their customers of security and reliability. Brick and stone buildings, stagecoaches and strongboxes, big steel vault doors when most assets are blips in some computer. That goodwill is one of their major assets. The first requirement of any customer is safety, knowing that your money is safer than in your mattress, before even considering any interest return. We even accept lower returns to their benefit in exchange for that perception of security. Yet it is amazing who some of them have climbed in bed with for a few dollars up front. From underwriting Enron's financing, to scamming their own customers with inflated "credit protection" or membership clubs sold thru telemarketers over whose sales practices they have no control, to sending unsolicited loan checks at obscene terms. All of these advertise the exact opposite message. They say to a customer: "Regardless of my fiduciary duty to you, you are just a sales opportunity, to be milked for profit any way I can think of." I just don't get it.
They only go up to $500, but their rate is $67 for 2 weeks for $500, so you would pay $1742 in "vig" (that's loan shark language for interest) for $500, double that for $1000. Oh yeah, they will also want their $500 or $1000 back, too. APR's over 370%
