CFPB Finds Half of Online Payday Borrowers Rack Up an Average of $185 in Bank Penalties
- Category: Hall of Shame
The Consumer Financial Protection Bureau (CFPB) issued a report that found that attempts by online lenders to debit payments from a consumer's checking account add a steep, hidden cost to online payday loans. Half of online borrowers rack up an average of $185 in bank penalties because at least one debit attempt overdrafts or fails. And one third of those borrowers who get hit with a bank penalty wind up having their account closed involuntarily.
"Taking out an online payday loan can result in collateral damage to a consumer's bank account," said CFPB Director Richard Cordray. "Bank penalty fees and account closures are a significant and hidden cost to these products. We are carefully considering this information as we continue to prepare new regulations in this market."
Specifically, the report found:
- Half of online borrowers are charged an average of $185 in bank penalties
- One third of online borrowers hit with a bank penalty wind up losing their account
- Repeated debit attempts typically fail to collect money from the consumer