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Although North Carolina outlawed payday lending over a decade ago, the state is again seeing the short-term, high-interest loans — this time from banks. Alabama-based Regions Bank offers a product called “Regions Ready Advance,” which lets consumers borrow up to $500 by pledging their next direct deposit. “If they weren’t a bank, they wouldn’t be able to offer this product in North Carolina,” said Chris Kukla, senior vice president at the Center for Responsible Lending (CRL). Kukla says the effective interest rates for Ready Advance loans could amount to 365 percent annually. However, the bank says that the product is essentially a small-dollar line of credit and does not fit the term “payday loan.” North Carolina allowed cash advance from 1997 until 2001, but lawmakers passed legislation that authorized the store-front shops to expire. The fees, though usually small, amounted to annual percentage rates that exceeded North Carolina usury laws. Regions Bank began offering its Ready Advance product 18 months ago, essentially breaking a de facto embargo on the practice. SunTrust, a much larger bank, is considering a similar product. Fees for payday products were typically $16 for every $100 borrowed, compared to Regions’ Ready Advance product, which charges $10 per $100. Although that seems like a small amount, CRL says that it amounts to an effective annual percentage rate of 365 percent. Kukla said that consumers have better options, such as a low-cost, small-dollar loan from the N.C. Employee’s Credit Union, which charges only a few dollars upfront. Across the country, regulators like the Consumer Finance Protection Bureau are noticing this trend of bank products that are similar to payday loans, but most banks operate under state banking laws rather than federal regulators
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