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Half
of borrowers who take out payday loans online incur an average
of $185 in bank penalties because of overdrafts or failed debits
to pay their loans, said the Consumer Financial Protection
Bureau in a report released on Wednesday.
Payday loans, which are small and short-term, are often made to
lower-income people, generally those who need cash between
paychecks.
Traditionally, borrowers made a single payment on the debt, but
the CFPB said online products varied, with some requiring
installment payments and others charging a series of
interest-only payments before a final repayment of principal.
The report comes as the agency prepares to propose a rule in
coming months to prohibit payday lenders from making more than
two attempts in succession on a borrower's checking or savings
account, the CFPB said.
Of those charged a penalty, a third wind up losing their
accounts, as banks seek to close accounts with a negative
balance or too many fees, according to the agency's analysis of
data on 330 lenders from 2011 and 2012.
The fees also mount because lenders make multiple attempts to
debit a payment or will split a payment into smaller amounts
that they try to debit, the bureau said.
(Reporting by Lisa Lambert; Editing by Peter Cooney)
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