Banks Providing Payday Loans

It seems at least Wells Fargo is now offering payday loans, though they call theirs a "direct deposit advance." (See Wells Fargo FAQ).  A large number of states prohibiting payday loans and an even larger number opposed to any federal charter for payday lenders.  (see Center for Responsible Lending).  It seems that some lenders are turning to setting up shop on the Internet, states that allow these loans or even in foreign countries.  (see Major Banks Aid in Payday Loans, New York Times).  While there is plenty to dislike about this product, how its marketed, the price, etc., there are also complaints against major banks that have been permitting withdrawals on these loans, even where the loans are illegal in the first place. 

Customers should be able to discontinue automatic withdrawals of any variety by a simple request to the bank.  Banks that don't comply with customer requests do so that their own peril.  Notice of a stop payment would seem to make any further transactions not properly payable under section 4-401 and prohibited under the Electronic Funds Transfer Act at the very least. There are some reports that the banks truly are attempting to increase overdraft fees by forcing customers on the edge to continue making auto-withdrawlas over a stop payment request.  While I am not surprised that banks might overreach at times, customer persistence may help to stomp this out.  Or at least an industrious attorney or law student who is able to remind banks of the rules of Article 4 and Regulation E under the Electronic Funds Transfer Act 205.10 (allowing customers to stop payment).

-JSM