North Carolina Banks Work on Payday Loan, Bank Loan Altneratives
By J.J. CameronPayday Loan Writer
Despite talk of a payday loan revival in North Carolina, it doesn't appear likely that cash advances will return to the state.
Therefore, in an attempt to help those in need, North Carolina's top bank regulator is championing a new way for banks to work with people who have bad credit.
"We're trying to develop a basic checking account that meets banks' profitability standards but does not gouge consumers with fees," said Joe Smith, the State Commissioner of Banks.
Until recently, those with a troubled credit history credit turned to instant payday loan lenders for small loans, usually just enough to cover bills until their next paycheck. With payday loan lenders banished from the state this year for charging exorbitant interest rates, some consumers have ended up on the wrong side of banks:
They have trouble qualifying for bank loans, often don't qualify for overdraft protection and end up getting charged fees of $25 to $35 for every bad check they write.
Smith envisions an exclusively card-based "checking" account - NO checks at all - that would prevent users from taking out money or making purchases that would overdraw their account. This would certainly take the place of savings account payday loans.
Rather, the bank would make available a small line of credit that users could draw from for unexpected costs or when money gets tight. Smith said the credit would be far cheaper than that it is on cheap payday loans.
Smith said he hopes to get all banks in the state to provide safe alternatives. For now, he is working with Charlotte-based First Charter Bank. He partnered with First Charter because of his relationship with its CEO Bob James and because of the bank's size.
"We're large enough to have the talent and resources to explore this and small enough to not get hung up in bureaucracy," said Kevin Toomb, First Charter's marketing executive in charge of the program.
First Charter is the fifth-largest bank in the state, with about $4.3 billion in assets. Toomb said the company will test its new program by October and possibly start a full-scale version next year if all goes well. He declined to provide details because the bank is still exploring a wide range of possibilities in lieu of faxless payday loans, he said.
