According to a recent study by Scripps Howard News Service, the cash advance payday lending industry pulls in about $35 billion dollars per year. Surprisingly, the average cash advance customer is middle income middle class, using the short term loans for sudden expenses. This controversial industry has been looked down upon by government agencies due to the higher APRs and fees associated with payday cash advances. Recent studies prove that even with the higher APRs and fees, payday advances are generally lower than bank overdraft or late fees.

Perhaps this is why top banks like U.S. Bancorp, Fifth Third Bancorp and Wells Fargo, have decided to adapt a form of payday advances in their own product ines. The Scripps Howard News Service study claims an estimates $7.3 billion in fees annually from payday loan customers. Many banks, finding themselves suffering from economical hardships may not be able to resist the temptation of that stream of income.

Flint Journal reports that Fifth Third Bancorp says the loans range up to $500 up to once per month come with an APR of 120 percent.  That works out to be about $10 per $100 borrowed. Standard Payday Advance Loans usually range from about $10-$20 depending on the lender, state, and local regulations. Flint Journal reports that Fifth Third Bancorp claims this is a product meant to help in emergency situations on a short term basis.

While rates and conditions vary, the banks offering these short term loans offer very similiar terms. Recent press releases indicate payday lenders welcome the banks to the cash advance market, but not everyone agrees. An assembly of demonstrators called N.C. United Power protesting banks mentioned payday loans as one of the products they consider bad practice.

Payday Cash advances are often the only option for unexpected emergencies as opposed to overdrafting, bouncing checks, or paying exhorbitant late fees. Banks entering the market may help reduce the animostiy politicians have shown towards payday lending. They may be able to pursuade states which have banned these loans completely to re-allow them, allowing options for these state’s citizens.

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There have been major setbacks in legislature with a plan to cap rates for payday lenders. Lawmakers think regulation can be done keeping in mind the favors of the industry. The bill proposes to cap rates at 36% and has been assigned to a committee of the lawmakers. It is said that if Payday loans are rolled over many times it may cost the borrower up to 500% annual interest.

The only state which does not have regulations for dealing with payday lenders is Wisconsin. After a hearing on Payday lending, the chairman of the financial committee, Rep. Jason Fields said that a cap on rate is not needed and due to lack of support from Sheridan and the Senate the committee is unlikely to pass a cap. According to him doing something which the Senate will not pass is not justified. Other regulations however will be approved. According to Fields, Poverty was there in Milwaukee even before payday loans.

Although, Gordon Hintz acknowledged his bill might not pass, yet he was of the view that rate cap is best way to regulate the industry. Sheridan’s statement that rate cap went too far was the first setback that Hintz faced last month. Industry said that a 36% cap will throw them out of business.

With four alternative proposals, cap title loans will require lenders to report more information and limit late payment charges and bar on rolling over two week loans thus practically banning it. On Wednesday’s hearing saw much audience with stickers saying ‘I choose payday advance’ lobbying, which was also testified by supporters of rate cap.

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The Debate Continues in Legislation and Payday Advances

The managing editor of MSN, Gurav Bhola,  speaks about the discussions that took place in Congress about the benefits of payday loans.

These discussions may materialize in the form of a law simililart to Mortgage reform and  Anti predatory Act of 2007, congressional legislation. If this bill passes it will overrule any state laws governing  mortgages and payday loans. There are some that aren’t too happy with this proposal, among which, there is North Carolina Attorney general Roy Cooper. He considers that North Carolina’s laws concerning the payday industry are stronger than the proposed federal legislation.

It is known that North Carolina has the strongest laws in the matter of payday loans and that is why Cooper is concerned that the federal legislation may weaken state laws. There are no other laws at a national level to govern payday cash advances, mortgages and other personal loans, the Mortgage Act being the first legislation of it’s kind.

The strongest measures were that of North Carolina against the Payday Industry which banned them from doing buisness within the state’s  borders. This drew the attention of  the payday lenders’ national Community Financial Services Association of America (CFSA). They believe North Carolina’s laws are far too strict.

The association argues that by discouraging consumers to access  payday loans the state of North Carolina is doing more harm than good.

They argue that without this option, consumers have to choose more expensive credits like high interest cash advances from credit cards or endure massive bank overdraft fees. They even assert that in states with prohibitive laws, cases of bankruptcies are higher because consumers were restricted in their access to short-term loans. Nevertheless , Cooper holds firm in his conviction that there is no  alternative to the prohibition of payday loans within the state.

Consumers currently have the option of looking online for payday advances or faxless payday loans. Numerous sites can provide access to quick cash only by filling out a form. The emergency loans are given usually within 24 hours, and the the cash fund are transferred within few minutes after their loan application is approved.

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