An investigation by a local ABC affiliate revealed that Wells Fargo and other major US banks fund many predatory lenders who target minority borrowers with high interest charges.
WFAA, a subsidiary of Dallas ABC, explored how the big banks won’t lend, but will continue to make money off South Dallas’ minority residents, including buying and profiting from low-income apartments that perpetuate crime and plague.
According to the survey, South Dallas has 88 payday lender storefronts. Payday lenders offer quick loans marketed as a way to pay for rent or a needed car repair. However, deep in the fine print are interest rates of up to 400% that are nearly impossible to repay.
Last week tonight did a segment in 2014 detailing how these loans quickly push minority customers into debt with significant interest charges. Texas was one of the states featured in the segment.
The states Office of the Consumer Credit Commissioner is responsible for regulating payday lenders, auto titles, installments and pawnbrokers. However, state law allows payday lenders and other lenders to load interest rate and fees far beyond what a traditional bank would charge.
The survey sought public records filed with the we Security and Exchange Commission and found 20 banks, including Wells Fargo, Bank of America, and Texas-based banks such as Capital Bank of Texas, TBK Bank, and Independent Bank, that have recently funded or are currently funding predatory lenders.
PremierCash, based in Fort Worth, describes itself as the leading international pawn shop operator, operates nearly 3,000 stores and charges up to 240% interest on a loan. The investigation revealed that Wells Fargo, Texas Capital Bank and Bank of Texas are all creditors of the company.
Global Finance, another high-cost lender that offers installment loans, where a person borrows a set amount of money all at once. The borrower can then repay the loan in a fixed number of payments, called installments.
These loans carry between 80% and 113% interest and a filing with the SEC in 2015 shows that Wells Fargo has committed $200 million to World Finance. Bank of America, was also a longtime lender to World Finance, but ended its relationship with the company last year and launched its own lending service called Help with balance, which allows customers to borrow up to $500, for a fee of $5, with much better terms and interest rates.
Wells Fargo, which almost paid $8 million to settle a class action lawsuit in a hiring bias lawsuit last year, responded to the inquiry in a statement.
“Wells Fargo provides credit and services to businesses in a variety of financial services industries,” spokeswoman Camille Brewer wrote. “We have relationships with companies that have demonstrated a strong and ongoing commitment and ability to comply with laws and regulations applicable to their business activities.
Black American and Latino households make up less than half of all households in the state (45%), but they make up 74% of payday loan customers according to the WFAA.