Shops that offer short-term, small-dollar loans with annual percentage rates of 300 and 400 percent do not cluster on urban street corners in North Carolina like they do in other states. That's because this is one of just four states where payday lending is prohibited.
But now a small regional bank - Regions Bank - has found a loophole. Two loopholes, really.
"Were they not a bank, it would not be legal to make that loan here in the state," says Chris Kukla, a senior vice president at the Center for Responsible Lending.
North Carolina won't allow payday lenders to set up shop here. But there's nothing to stop banks from making the loans - unless they're North Carolina banks.
"It would not be legal if (Regions Bank) were a North Carolina bank offering this product," says Kukla.
So that's loophole number two for Regions Bank, which is chartered in Alabama where lending laws are more lenient.
Federal law allows banks to live by the laws of their home state. So it may be legal for Regions Bank to offer this payday loan in North Carolina, but that doesn't make it right, says Al Ripley of the NC Justice Center.
"We believe this is an abusive product and that no responsible financial entity should make this product available to its customers," says Ripley.
At issue is the "Ready Advance" product from Regions Bank. It's a revolving line of credit up to $500 with fees that could make for an APR of more than 300 percent depending on how many loans you take out.
Regions Bank itself acknowledges, "this is an expensive form of credit," says spokeswoman Evelyn Mitchell. That fact is printed boldly on all Ready Advance paperwork.
But Mitchell says the bank surveyed its customers and found they wanted a product like this.
"We wanted to provide something that was more affordable . . . and give our customers additional opportunity to build their credit and give them access to emergency funds if needed," says Mitchell.
Unlike a payday lender, Regions reports payment information to the credit bureaus, so taking out a Ready Advance loan and paying it promptly could help your credit score.
But Chris Kukla says the Center for Responsible Lending has studied similar products offered at other banks and found a different pattern: "The average bank payday lending borrower gets 14 of these loans a year and overall they were in debt to the bank for 175 days."
Other banks offering these short-term, small-dollar, high-interest loans include Wells Fargo, Fifth-Third and US Bank. But they have chosen not to offer them in North Carolina.
Now consumer advocates worry other banks will see Regions getting away with it and decide to do it too.