Some of the nation’s largest banks are offering payday loans, short-term loans with triple-digit interest rates that trap borrowers in a cycle of debt, alleges the Center for Responsible Lending (CRL) in a new report.

Mainstream banks offering payday loans include Wells Fargo Bank, U.S. Bank, Regions Bank, Fifth Third Bank, Guaranty Bank and Bank of Oklahoma and its affiliates.

Bank payday loans, or cash advances against expected paychecks or Social Security benefits, have annual percentage rates averaging from 225 to 300 percent. Banks market their payday loans under friendly sounding names like Ready Advance, Early Access or Easy Advance.

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The loans have short terms with balloon payments. Thus, borrowers, who usually have low incomes, are typically unable to repay the entire loan and fees as well as living expenses. The borrowers, CRL asserts, must take out another payday loan, becoming trapped in a cycle of debt.

The median bank payday borrower took out 13.5 loans in 2011 and was in payday loan debt at least part of six months annually. In other words, the report states, a typical borrower had one or more bank payday loans outstanding at some point in six months of the year.

Banks say the loans help customers avoid overdraft fees, but the study finds that almost two-thirds of the payday borrowers pay overdraft fees.

The loans hit seniors particularly hard. Over a quarter of bank payday borrowers are Social Security recipients.

The loans are also bad for banks, the report warns, as they pose serious safety and soundness concerns, violate the principle that lending should be based on the borrower’s ability to repay, risk violating consumer protection laws and post severe risks to banks’ reputations.

Despite complaints about payday loans, federal regulators have yet to move to end the practice, according to CRL.

“We’re very clear that this is an expensive form of credit and not to be used as a long-term solution,” Wells Fargo spokeswoman Richele Messick told The Washington Post. “We are very upfront and transparent with our customers about this service.”

If customers can’t repay the loan, the bank says it still leaves them a $100 cushion, according to The Post. It also offers an installment plan to avoid balloon payments, but it’s offered only to customers with $300 in outstanding debt and who have had balloon payments for three months in a row.

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