Well, Poop

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A new study shows, rather unsurprisingly, that people who take out payday loans often need more than one loan. By the time that someone is at the point that they’re looking to get an advance on money they’re already going to be receiving, and getting it at a stiff penalty, that single advance is not going to set things straight. The person getting the loan likely can’t afford the penalty to begin with, and what they’re most likely doing is deciding to pay penalty A (the high fees on a payday loan) over penalty B (the shutdown of utilities, ruining of credit rating, etc.). Should you need one more bit of evidence that payday loans are little more than modern-day financial slavery, there you go.

Now, the interesting part about all of this is that I logged into my bank account this morning. No, really, me logging into my bank is fascinatingly amazing.

I bank (well, now, banked) at Fifth Third, which notified me of a great new option this morning: Fifth Third Early Access. Were this a 1950s musical, you’d probably wander up to me dressed in your Sunday best and say, “Sir, that sounds fantastic! I do love accessing my bank, and good ol’ Ben Franklin himself said that bein’ early was great!”

And then, because I’m a cynical 21st century scam artist masquerading as the Good Humor man or whatever people in olden times bought their cocaine-laced sodas from, I sign you up for a direct deposit payday loan with a mere 120% APR. Details below the fold:

• Real-time transaction where you can transfer cash into your associated checking account.
• Automatic payoff of each outstanding Advance balance and associated finance charge. Payments will be automatically deducted from your associated checking account on your next qualifying direct deposit of $100 or more. If there is an outstanding balance on the 35th day after each Advance, we will automatically pay off the outstanding Advance balance from the associated checking account.
• Associated finance charge with advance is 10% ($1 for every $10 borrowed) each time you make an advance, which equates to an 120% Annual Percentage Rate (APR).
• Advances can be made in dollar increments up to your maximum credit limit. If your associated checking account is negative, an advance must bring your checking account to a positive status before you can access your full credit limit.

So, not only do you get to go through a paperless payday loan that’s automatically processed by the bank (which may or may not happen in “real time” and may or may not clear your account in time for an impending bill), but your payment is also automatically deducted from your account on the 35th day. If you don’t have the money in your account, you will, of course, overdraft (and chances are, you will, and chances are, you’ll do it multiple times because of the old “largest payments first” rule). But don’t worry, there are protections (PDF link). For instance, you may only overdraft 20 times (at $35 a pop) before you’re not allowed to take out an advance…for one month. And then you can do it all over again.

It’s not just that this is predatory lending – it is – but that it takes the old, comfortable way of getting ripped off and makes it so much cooler. And by cooler, I mean likely to cost hundreds of dollars more than a typical payday loan because it’s tied directly into every other financial transaction you make.

Credit union, here I come…