Payday loan operators—abundant throughout Idaho—have found new behind-the-scenes allies: major banks.
This morning's New York Times reports that the banks—including JPMorgan Chase, Bank of America and Wells Fargo—are "a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers' bank accounts." The Times' Jessica Silver-Greenberg reports that in some cases, "the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals."
The Idaho Community Action Network says when Gem State residents borrow large amounts of money from payday lenders, it begins a vicious cycle.
"They go to social services, which are already very crowded," ICAN's Yuliana Nogales told Citydesk. "It's just like home loans that were given to people who can't afford it. They're given money; they know they can't pay it [back]."
According to Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, payday lenders' alliances with major banks perpetuate the problem.
"Without the assistance of the banks in processing and sending electronic funds, these lenders simply couldn't operate," Zinner told the Times.
According to a new report from the Pew Charitable Trusts, approximately 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts.