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Bank of America Hints at Plans to Exit Payday Lending

Adam R.'s picture

Posted December 18, 2013

Bank of America may be on the verge of implementing plans to divest from its investments in payday lenders. 

A report in yesterday's Charlotte Observer seems to indicate that this decision may have been made internally in the last few months.

Bank of America said in a statement that it has not “pursued new credit relationships in the payday lending industry” for several years, and it made the decision earlier this year to get out of that line of business entirely. The bank said it is ending its current relationships with such companies over time.

While this portends a significant change for the lender whose investments were reported at more than $600 million, a formal announcement has still not been made by the company. Given that, these kinds of back channel comments lack for much in the way of accountabilty. Certainly, it would give the public much more ability to hold the bank accountable for that promise if its own executives were on the record with a statement to that effect.

Moreover, any indication of such a decision is still not evident in the reports made by some of their partners. World Acceptance - a company that provides all kinds of high-cost lending products - recently announced a new agreement with a group of banks that included Bank of America.

World signed a new credit agreement in fall 2012 and then renewed it three months ago. The specific lenders were listed in 2012. The 8-k referenced an offering of $150 million from Bank of America. The amendment in 2013 did not list banks by name.

The key event in my mind is that public announcement. That changes everything. Until then, promises are nothing more than feel-good responses to awkward news reports.