Regions Bank To Drop Payday Loan Product
Calvert and other investors declare success after Regions Bank announced it will drop its payday loan product and instead will begin to provide personal installment loans to its customers.
Investor coalitions, including members of the Socially Responsible Investment Coalition and Northwest Responsible Investment Coalition, with Calvert taking the lead, had engaged Regions Financial regarding its payday loan product, Ready Advance for over a year. Calvert and the coalitions filed a shareholder resolution in 2012 requesting the company provide a report assessing the adequacy of Regions Bank’s lending policies in addressing the social and financial impacts of the direct deposit advance product on its customers. The SEC ruled that the proposal could be omitted; however, the company agreed to continue the dialogue on the payday loan product.
The investor coalition stressed to the company that research has long shown that payday loans cause serious financial harm to borrowers, including increased likelihood of bankruptcy, paying credit card debts and other bills late, delayed medical care, and loss of basic banking privileges because of repeated overdrafts. Payday lending has a particularly adverse impact on African Americans and Latinos, as a disproportionate share of payday borrowers come from communities of color. In addition, a large number of bank payday borrowers are Social Security recipients, whose benefits banks take for loan repayment before borrowers can use those funds for healthcare, prescription medicines, or other critical expenses. Bank payday lending poses these risks in part because it causes severe harm to banks’ customers. This is especially true for individuals who are most vulnerable, such as, the elderly and low-income.
On January 15, 2014, the company announced it will drop the product from its offerings next week for new customers. Regions Bank will now allow customers to apply for low-fixed income interest rate personal installment loan secured by funds in their Regions saving accountings, with loans beginning at as little as $250.
We are continuing our engagement with the bank to learn more about the new Regions Savings Secured Loan product. Investors will also continue to work with Center for Responsible Lending (CRL) on this engagement and engagement with other banks.