And the biggest payday lender is . . .

This post comes from James R. Hood at partner site ConsumerAffairs.com.

The weak economy is making it harder for big banks to lend money, and that's driving cash-poor consumers into the arms of unscrupulous payday lenders, right?

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Well, not quite, says a report that finds big banks like Wells Fargo and Bank of America are only too eager to lend billions of dollars to some industries like, oh, the payday lenders.

"While small businesses and individuals have struggled to get affordable loans in the wake of the taxpayer bailouts, payday lenders have received new and amended credit agreements from Wall Street," says the report. "Instead of wading further into the business of predatory payday lending, big banks need to stop financing these lenders and instead lend to businesses and individuals that create wealth, rather than destroy it."

In fact, the study by grassroots groups National People's Action and Public Accountability Initiative singles out Wells Fargo, saying it finances more payday lenders than any other big bank, pouring fuel onto the already flaming growth of big payday lenders like Advance America and Cash Advance Centers Inc.

The report, dubbed "The Predator's Creditors," includes diagrams showing the ties between payday lenders and the big banks that benefited from the Troubled Asset Relief Program, perhaps justifying the tea-party allegation that the Wall Street bailouts haven't done much for Main Street.

"Ultimately, the big banks that borrow at near-zero interest rates from the Federal Reserve are not far removed from the payday companies that lend money at 500%," the report charges.

Lest anyone thinks the report is making a mountain from the proverbial molehill, the report notes that the growth of the payday loan industry has been virtually explosive, growing from 2,000 payday stores in 1995 to 10 times that number today, while loan volume by publicly traded payday lenders has nearly doubled from 2003 to 2007, as banks and other traditional lenders began cutting back their consumer loan activity.

Nor is it that the payday lenders simply appeared at the bankers' door. The report chronicles the founding and growth of Advance America, the largest payday lending company. It secured somewhere between $40 million and $50 million in financing from Wells Fargo, Wachovia (now part of Wells Fargo) and NationsBank (now Bank of America) before it had even begun operating.

How? "Using their connections," said Gary Rivlin, author of "Broke, USA," which traces the recent impoverishment of the middle class.

Those connections are still solid. Today, the report finds, big banks offer more than $1.5 billion in credit to major, publicly traded payday lenders, and about $3 billion to the industry as a whole. Wells Fargo lends to more payday loan companies than any other big bank, lending to both publicly and privately held companies.

While some large banks refuse to finance payday lenders because of the "reputational risk," most are only too happy to. And good money it is. The report estimates that major publicly traded payday lenders paid about $70 million in interest in 2009.

The biggest payday lenders, the report found, are financed by a number of TARP-financed banks, which received billions of dollars in taxpayer bailouts. They include Bank of America, JPMorgan, Wells Fargo, U.S. Bank, KeyBank and Banco Popular.

Industry reaction

Industry reaction to the report was swift. A Wells Fargo spokesman said the bank "exercises strict due diligence with these customers."

The Los Angeles Times reports: "Bank of America Corp. has financed some payday lenders but tries to avoid doing so, applying a stricter-than-usual screening process when they apply for credit, said Jefferson George, a spokesman for the bank."

Steve Schlein of a payday lenders organization said payday loans "are a valuable service to millions of American consumers that have short-term financial needs."

More from ConsumerAffairs.com and MSN Money:

• Payday loan industry mounts PR offensive
• Deceptive 'credit card' marketers settle FTC charges
• Nationwide class action filed over egg contamination
• How payday loans became big business
• Texas towns take on payday lenders
• Loans with triple-digit interest