Pay day loans are proving out to be boon for the banks especially in these tough times when it is very hard to earn profit from your business. Banks are charging very high interest rates on these loans some times interest rates goes in triple digit.
Few months ago when US economy was crippled with deep recession and many leading banks are either failed or are on the verge of failing. At that time US Federal government came up with a bailout plans for the banks with the help of that bailout many banks were saved Wells Fargo and US Bancorp are some of them and the bailout was financed through U.S. tax payers money In spite of this these banks are raking in money by charging hefty interest rates on payday loans and other short term loans from the people with no savings, consumer advocates say.
Pay check cashing storefronts, are once the sole domain of freestanding, but in these time payday loans are proving to send borrowers very deep into debt, while making hefty profits for the lender, according to the National Consumer Law Center.
The Federal Deposit Insurance Corporation in 2008 issued a guide line in which they suggested the banks to charge up to 36 percent of interest. Wells Fargo, U.S. Bancorp and some banks are not following the voluntary guidelines and are charging triple-digit interest on payday loans to cash-strapped customers, according to consumer organizations. The hardest hit is families with little savings.
If we look into positive side of all these we should understand the role of a bank in a countries economy and when bank grows the economy will also grow and that will benefit every citizen of a country.
