U.S. Bank has launched ‘Simple Loan‘ that aims to compete with payday loan lenders. Consumers can borrow up to $100-$1,000 in increments of $100. The loans are repaid over three months. The fee structure is that you pay $12 with automatic payments or $15 with manual payments per $100 borrowed. This means with automatic payments you’re paying an APR of more than 70%.
Back in October 2017 the Office of the Comptroller of Currency (OCC) rescinded guidance that made it more difficult for banks to offer these types of loans. In May of this year they encourage banks to reconsider this small-dollar lending. My main issue with these types of loans is that those who are least able to pay the high interest rates and fees are the ones most likely to use them. This can often result in a cycle of debt that people are trapped by and have very little hope of ever escaping.
