Consumer advocacy groups are celebrating that predatory payday loans have been eradicated – again – in North Carolina.
Alabama-based Regions Bank, which has six branches in North Carolina, including two in Raleigh and three in the Charlotte area, recently stopped offering its Ready Advance loans in the wake of protests from consumer groups and state officials. They had vilified the bank for offering what was, in their view, the only payday loan available to consumers in North Carolina.
“This is a great victory for the folks in the state,” said Chris Kukla, senior counsel for government affairs at the Center for Responsible Lending. “We certainly hope it’s a sign that we are going to continue to keep North Carolina payday-lending free.”
A spokeswoman for Regions Bank, which contends its Ready Advance is not a payday loan, characterized the discontinuation of the loans in mid-December as a business decision. The bank, which continues to offer Ready Advance loans in other states, noted that since it began offering the loans in May 2011, “fewer than 200” customers in the state had established Ready Advance accounts.
But Jeff Shaw, spokesman for the N.C. Justice Center, argued that “the only logical explanation is that public pressure made the difference in this fight.”
North Carolina was the first state in the nation to shut down payday-lending outlets, eliminating the last of them in 2006. But state Attorney General Roy Cooper said in an interview last fall that halting Regions Bank’s loans was tricky because of the bank’s out-of-state-charter and the fact that it only offered the loans online.
Regions Bank’s loan, available only to online customers who had a checking account for at least nine months, charged $10 for every $100 borrowed. The Center for Responsible Lending calculated that amounted to an annual percentage rate of between 120 percent and 365 percent, depending on how quickly the customer paid back the loan.
“These are really high-cost loans that harm consumers,” Kukla said. “Our research has shown that loans like these trap people in debt long term.”
Regions contends that its loans fulfilled a customer need and reported that its surveys of Ready Advance customers “have been overwhelmingly positive with an overall product satisfaction score of 4.59 on a 5-point scale.”
Consumer groups had been worried that other banks might try to follow Regions’ lead and offer payday loans of their own, but Shaw said that is much less likely now.
“I think it sends a strong signal to other lenders that may want to engage in exploitative practices that this is not the kind of thing that is going to fly in North Carolina,” he said.