“Dear Trihouse Payday Loan Company,

Regretfully, we can no longer service your payday loan company. Although you’ve been a great customer for years and we’ve made a ton of money off of you, you have 30 days to find a new bank. We have no clues, ideas or suggestions for you. You’ve done nothing wrong. We just don’t like your industry.

Sincerely, Wells Fargo Bank.”

“Bank discontinuance” has been an issue for payday lenders, check cashers, and money service businesses for years. The first FISCA conference I attended in 1998 (actually it was then called The National Association of Check Cashers) had a workshop focused on “Bank Discontinuance.”

Funny thing is, Wells Fargo, in addition to CitiBank, Fifth Third and others, provide financing for the “big boys” in the small dollar lending industry!  Adam Rust, an opponent of the payday loan industry, has worked hard at documenting this. From Adam:

“Commercial banks, including Wells Fargo in San Francisco and U.S. Bank, are a significant source of capital for the country’s $48 billion payday loan industry, extending more than $1 billion to companies such as CashNetUSA parent Cash America, Dollar Financial and First Cash Financial.”

I recommend you signup for BankTalk.org. [No affiliation other than that he’s worth following.]

And, get this: Fifth Third bank has re-entered the payday loan industry as a LENDER while shutting down their competition – those of us in the PDL space. Revisions of Fifth Third Bank’s payday loan product called Early Access service include a reduction of the transaction fee from 10% to 3% of the amount of each advance, increasing the repayment deadline for each advance from 35 days to 45 days, and a reduction in the number of months a customer may advance the maximum credit limit from six to three months. Worse, this Fifth Third program gives no attention to a borrower’s ability to pay; an issue we are continually attacked for. The FCC and the OCC have made specific reference to this for pressuring Fifth Third Bank, U.S. Bank, Wells Fargo, Regions and others to shut down these payday loan styled products.

Banks are using “Operation Choke Point” , and every other excuse possible, to shut down the small fish in the payday loan industry. Again, not only are they offering competing products, but they provide capital to the incumbents.

Here is the official announcement from Fifth Third:

On January 17, 2014, Fifth Third Bank announced that it will no longer offer new customers its Early Access deposit advance service after January 31, 2014.

Effective January 1, 2015, Fifth Third Bank is making changes to its Early Access deposit advance service.

The following is a summary of the changes:

• Lower Cost: Fifth Third is reducing the cost of the Early Access transaction fee from 10% of the amount of each advance to 3% of the amount of each advance. For example, if you advance $100 on or after January 1, 2015, you will be charged $3 instead of $10 for that advance. This will go into effect for each advance made after 9 p.m. ET, December 31, 2014.
• More Time to Repay: We are increasing the repayment deadline for each advance from 35 days to 45 days. Therefore, any advance or portion of any advance that is still outstanding as of January 1, 2015, must be paid in full by the 45th day from the date the advance was drawn, or the amount will be automatically debited from your associated checking account. (Please remember that Fifth Third will automatically repay your advance from your next direct deposit of $100 or greater until the advance is paid in full.)
• Reduced Maximum Advance Period: We are decreasing the number of months that you may advance your maximum credit limits from six months to three months. If for 3 consecutive months you have advanced the maximum amount of your credit limit, you will be ineligible for an advance for 30 days following the 3rd month. For example, if you advanced your maximum credit limit in October, November, and December of 2014, as of January 1, 2015, you will be ineligible for an advance for 30 days.
• “”Fifth Third continues to proactively engage with key stakeholders to review new options for what the bank considers a clear and continued need for small-dollar, short-term credit solutions,” it said in a news release. “A primary objective is to serve customers within the traditional banking system, rather than having them access less-regulated providers outside the banking system.”

The gall!! The audacity!! The boldness!!! Astounding? No! Remember, I’m talking about A BANK. And let’s not forget these banks get money from the FED at discount rates that would cause a loan shark to blush, then loan it to consumer facing lenders such as World Acceptance, CSH, DLLR, Enova, QC Holdings at prime + 500 basis points.

Bottom line? If you have a bank, get a backup. If you lost your bank, SORRY! If you’re a small bank with aspirations to become much larger and collaborate with successful, licensed lenders with serious AML programs in place, call Jer at 702-208-6736 or shoot an introductory email to Jer@TrihouseConsulting.com