Regions Bank says it will pull the Ready Advance product from its North Carolina stores.
Lots of people criticized Regions for offering what were readily identified as
bank payday loans. The Ready Advance came with a high draw fee and then additional interest charge. Regions collected on the advance with the next direct deposit that came into the account. The product was only available to people that had another account with Regions. The amount of the credit line was determined by the size of the direct deposit, but could have been as much as $500 per month.
Regions charged $1 for every $10 advanced. When coupled with an interest rate of 21 percent, advocates said that it amounted to a payday loan with an APR north of 200 percent.
When Regions presented its product to an audience at the 2012 UnderBanked Financial Services Forum, several audience members wanted to understand how Regions could do what their regulator would not let them do.
"How do you get this by your regulator," asked one credit union staffer.
"Easy," to paraphrase the response, "we export Alabama state law as a money transmitter."
While that was true, Regions is also regulated by the Federal Reserve. Given that North Carolina had gone to great lengths to extinguish payday loans back in 2004, North Carolina Attorney General Roy Cooper made a push to force the product out of the state.
Regions says that approximately 200 consumers signed up for the Ready Advance in North Carolina.
It is hard to believe that these loans should can be distinguished from a traditional payday loan. Regions' hubris was that it imagined that its status as a bank somehow gave it privileges which would not be extended to a regular payday lender. In pulling back in at least one state, that logic is beginning to lose its strength.
Nonetheless, there is probably more fight ahead for Regions. It is hard to believe that a company like Advance America or Cash America will continue to sit on the sidelines while Regions takes business from them throughout the states in the Southeast that continue to allow payday lending.