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Believe it or not, the State of Arkansas passed a law about 2 years ago which banned payday loan operations in the state. I think by the end of 2008 all payday loan operators where to shut theirs businesses. Many converted to cash-for-gold operations...
Just because you won't doen't mean that others won't either.
There are plenty of people that don't have the luxury of turning elsewhere to find immediate sources for cash.
For them, they'll the stuck in a vicious cycle until someone does something about it.
I'm not adverse to tarring and feathering owners of such criminal establishments.
If payday loans are banned, prospective customers will probably be pushed a rung down on the consumer credit ladder, which in this case would likely be pawn shops and title loan businesses.
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So if they don't have anywhere to turn now for cash except payday loan places, and all the payday loan places close, then where will they go? And if they can't get cash any other way, how does that make them better off?
Yes, payday loan places charge stupidly high interest, but people use them because they need the money and don't have another choice.
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@madanthony: Is \"but it lends money to poor and desperate people\" really all you care about as an appropriate business model? Do you really want to go there?
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-537475-100x100.png\")
@madanthony: But \"having no other choicee\" should not automatically mean people can put themselves into serious amount of debt which may perpetuate a lower quality of life in the long run.
The only problem I have with banning payday loans altogether is only that of personal responsibility. These guys are pure scum - they prey on people who are less educated on financial matters, and they prey on those who are desperate. But at what point do you just protect people and what point should you actually educate them to avoid these lenders in the first place?
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@pecan 3.14159265: Yeah, I've used payday loans and they have really helped, but they are FAR too easy to abuse and they are run by loan sharks. I wish they were regulated more, were harder to abuse/overuse, etc. But that ain't gonna happen.
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Absurd. Not enough bankruptcies in '09, want 'em to grow even faster in '10?
@Trai_Dep: Oh, hold on.
Banning roll-overs and preventing loan sharks/lenders from leveraging the State to enforce their malarky actually would block many of the long-term, destructive elements of the payday lenders.
If the sharks are too lax, they lose their money with little recourse: a built-in check stopping their practices from overrunning their (alleged) utility.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-109901-100x100.png\")
Surely these two Democrats must be EVIL REPUBLICANS in disguise.
@MichaelBrazell:
I think the internet documenting every single thing an elected official does is enabling us to see that, regardless of hype, both parties are just fucking with us and acting contrary to our best interests on a regular basis.
A third party is way overdue.
@dieselmachine: Problem is a third party could never win any significant power right now. To be in the middle, you have to pick and choose which issues on the left and right you are taking. Right now, if you aren't far enough to the left or right you can't capture a large enough base of voters to build on.
@dieselmachine: Yeah, because a couple House Dems proposing a VERY mixed bill for payday loan companies* totally balances out a wrecked global economy for a generation, Iraq, Culture of Corruption™, Bridge to Nowhere, record surpluses turned to yawning, record deficits and trillions of dollars of lost stock market losses that probably raped you personally quite badly (I'm assuming that you're one of those \"if it doesn't affect me, it didn't happen\" people).
Gotcha!
* Seriously - it's not a giveaway. RTFA.
@dieselmachine: There are plenty of them, it's just a matter of getting them onto the national stage.
@Canino: Sorry, my intentions were to point out how Consumerist left off the (D-) after the two guys names, which usually doesn't happen when Consumerists is running negative stories about guys who happen to have (R-) after their name (in that case, it's usually on the article title). See: every story from August 2008 - January 2009 (and occasionally before and after)
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-351903-100x100.png\")
@MichaelBrazell: Thank you. It's kind of like during the whole William Jefferson (Democrat - Louisiana) scandals now once did any news media outlet did it.
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@MichaelBrazell: I haven't been following Consumerist long enough to establish that kind of history for myself. I hope you're wrong and they aren't showing the same kind of bias by ommission that regular media outlets practice.
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I am curious what the default rate on payday loans is, and how that relates to the interest rate.
Particularly for loans where fraud is likely to be rampant, due to the adverse selection involved in people who actively seek out a lender who will not check their credit.
I guess the question is why should Congress be regulating this? Yes, it's a stupid thing to take out a payday loan, but it's also stupid to watch a Carrot Top movie, or to get tremendously drunk, or to cheat on your spouse, and those are all legal.
Honestly, the terms are crappy, but that's what happens when you walk in essentially wearing a sign that says \"I have defaulted on large amounts of debt in the past.\"
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-631384-100x100.png\")
@huadpe: \"...but it's also stupid to watch a Carrot Top movie..\" Hey I resent that statement. I own Carrot Top's movie CHAIRMAN OF THE BOARD on DVD. I really got it because pretty COURTNEY THORNE-SMITH plays the love interest. In real life, Carrot Top really wigged-out on steroids. He is on LENO all the time and man does he look freaky.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-202178-100x100.png\")
@huadpe: Maybe it's just me but the world would be a better place if watching Carrot Top was illegal.
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-930037-100x100.png\")
I guess the anti-payday loan crowd must expect those who will no longer be able to get short-terms loans to go without feeding their kids (or themselves), paying their bills, fixing their cars or taking care of any other unexpected needs. But hey, we're keeping them from voluntarily entering contracts that will cost them a bunch of money, so it's all OK.
@Esquire99: Bull Hockey. There were plenty of places that did short term loans before payday lenders crawled out from under their rock.
Small finance companies, regular banks and credit unions used to do small short term loans for certain circumstances.
@bohemian:
Nowadays most banks issue credit cards instead of short term loans which I would contend is a better option for most people. Payday lenders are for people who can't even get one of those.
@bohemian: Why don't those institutions still do those loans? Certainly not because the payday loans are undercutting them.
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@Esquire99: The problem comes with the deliberate misconceptions, hidden fees, etc. that these companies sell to the people who go there. You'd probably be better off getting a loan from the Mafia. At least there you know the score.
@Esquire99: Who's keeping people from getting short-term loans? You just have to loan them money at a reasonable rate of interest.
@mythago: If you think it's profitable to loan them money at what you believe is a \"reasonable rate\" here's your chance to fill that niche and get rich while helping others. Win/win.
@Yossarian:
I have a feeling that mythago would quickly find out that lending money at \"Reasonable\" rates to borrowers who aren't exactly \"Credit worthy\" is unprofitable, and would promptly close up shop along with the other payday lenders who were regulated out of existence.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-6173-100x100.png\")
@Esquire99: Untrue! Self-Help Credit Union in North Carolina makes massive quantities of loans to \"subprime\" customers -- and that includes mortgages, small business loans, etc. They're quite profitable and have the lowest mortgage default rate in the state (or did, last I checked). What do they do that's different? Require borrowers to do some education so they understand what they're agreeing to.
Reasonable rates to \"subprime\" customers can be extremely profitable ... if you're interested in actually having the loan repaid, not in making bank on fees and defaults.
@Eyebrows McGee (on Twitter: LPetelle): Mortgages and small business loans require much more documentation and proof of identity and intent than a payday loan.
Part of why payday loans are so expensive is that they are non-collateralized (unlike a mortgage), and without a specific purpose the bank thinks is likely to make them repayable (like a small biz loan).
Payday shops don't give out $150,000 loans, and comparing a mortgage to a payday loan is silly.
While I agree alot of people don't know what they're getting into with a payday loan, the same is true in any number of situations, such as buying a warranty at best buy. Just because it's a bad idea doesn't mean it should be illegal.
@Eyebrows McGee (on Twitter: LPetelle): \"What do they do that's different? Require borrowers to do some education so they understand what they're agreeing to.\" So they essentially take the cream of the subprime crop.
What that CU is doing is a very good thing for those who get the education and perhaps get their credit situation back on track. I'm not sure we can draw the conclusion that such borrowers are necessarily representative of payday loan borrowers as a whole.
Why do so many people seem to believe that people who take payday loans are awful duplicitous people?
Why is it so hard to believe that some people are down and out, and financially undereducated?
Social capital and education are the reasons why we all know that payday loans are a scam. If any of the posters here honestly think they would automatically pick that up if they were poor enough to even need a payday loan in the first place, you are deluded.
@aguacarbonica: I don't think that people who take payday loans are necessarily awful duplicitous people. I think that they are at very high risk of not paying back unsecured loans as agreed and that this risk should be reflected in higher interest rates which the borrower can choose to accept or not.
@mythago: Way to dodge the issue. If there were money to be made making payday loans at rates you consider reasonable, there would be a lot of people doing it and driving the high-interest places out of business, wouldn't there? If not, why not?
I think people ought to be able to do to their bodies as they wish (drugs) or rent their entire body (prostitution) or sell parts of it (kidneys) legally, so it may just be that we have incompatible views of the amount of autonomy individuals should have.
If you can't differentiate between someone's choosing to take out a loan at a rate you consider too high and someone having their money taken under the threat of death, it's a waste of time trying to engage you in rational discourse.
@Charles Duffy: Maybe the credit union doesn't advertise those loans heavily because they are able to offer those loans to members with a reasonable expectation of being paid back, whereas that expectation doesn't hold true when applied to the larger pool of people who need short term unsecured loans. Why do you think these loans aren't advertised more widely if they would be profitable and there is such a large pool of potential borrowers?
@Yossarian: \"I think people ought to be able to do to their bodies as they wish (drugs) or rent their entire body (prostitution) or sell parts of it (kidneys) legally, so it may just be that we have incompatible views of the amount of autonomy individuals should have.\"
But these payday loan places don't just harm the borrowers -- they harm the neighborhoods they're located in. They harm the community. They can do whatever the hell the want with their personal monetary situations, sure, but the SIX PAYDAY LOAN PLACES WITHIN A MILE OF MY HOUSE are driving down home values and destabilizing my stable, middle-class neighborhood. Full of people who, by and large, don't patronize payday lenders. (There's a serious zoning snafu that landed us with all of them. But no alcohol for freaking miles.)
Not that it would be particularly better for them to be located in the poor part of town, further destabilizing an already destabilized area.
If they can operate without being a cancer on society that destroys and devours the neighborhoods around them, then maybe we can start talking \"personal responsibility\" and \"individual choices.\" But so far, they can't.
People around here don't hate them for their usury -- they hate them because they're destroying our city. They drive down property values so much they created their own special, unanticipated hole in our city budget that wasn't accounted for in the \"down economy\" models we were predicting with. And they drive out the functional businesses around them, further dropping property tax and sales tax revenues. So I don't know where, exactly, you live that payday lenders are only hurting people who borrow from them, but that's simply not the reality. They're parasites. They suck the life out of functioning business districts and leave a dead, dry husk. All for providing a dubious \"service\" that removes value from the community.
@Eyebrows McGee (on Twitter: LPetelle): SIX payday lenders and NO liquor stores w/in six miles?
Revolutions have started for less...
@Trai_Dep: I think the closest liquor-specific store is 3 miles. Closest supermarket with a liquor section is about 2.
But still. I can walk to six payday lenders, a pawn shop, a locksmith, and one of those scammy furniture rental places. We used to have an ethnic foods mart, a bowling alley, multiple restaurants, a gym, a barbershop, a prom dress shop ... all places the payday lenders have driven out or taken over. We still have the Walgreens, the psychic, the Blockbuster, and a cursed fast-food place, but we'll see how long they stick around. When payday lenders moved in in such a high concentration, traffic to the district shifted away from shoppers to payday borrowers, which made the whole district less attractive. And now even the payday lenders aren't getting as much traffic (since they used to get people going to the barbershop, say), so they may start moving out. Which will leave us with empty storefronts everywhere, at least until the economy picks up.
Before they swooped in to destroy the district, we had one payday loan place, which nobody was delighted about, but nobody really objected to either. It's the super-high concentration that's destroying the area, and a lot of owners of the businesses that are left are looking to move because there's no shopping traffic anymore. (And, yes, crime rates have gone up. But not so much I think it would deter legitimate businesses if there was any shopping traffic to be had.)
@kmw2: 30% per 2 week period revolving isn't 391% apr, it's 91,733%.
391% APR comes to about 5.4% per period compounding. That would be $27 for a $500 loan. Not too cheap, but if you're really in a pinch can be worth it.
@Eyebrows McGee (on Twitter: LPetelle):
So you don't have a problem with payday lenders generally, you just don't want them bringing poor people to your neighborhood and lowing your home value? Really classy argument.
@Esquire99: Actually, I keep fighting to get alcohol in our zoning area, despite the local opposition that says only poor folks buy alcohol! Poor folks and me, apparently. :) Alternatively, my net worth is doing things it hasn't informed me about.
I object to the payday loan lenders not because of their clientele, but because they've decimated the local business district and driven out many of the legitimate businesses, while putting a massive hole in our local budget.
They're not lowering my home value because of their clientele -- they're lowering my home value because they're driving all the legitimate and useful businesses out of the local business district. I frankly don't care who shops or patronizes that district -- the more people, the better. I care that they're a net drain on society that destabilizes neighborhoods and costs SUBSTANTIALLY more than they bring in in tax dollars. In addition to the part where they prey on the vulnerable, which I object to in a moral way, even if we all agree that legally people should be allowed to be preyed on.
But it's disingenuous to argue that payday lenders are okay because people can CHOOSE to hurt themselves and they're only hurting themselves. That's true -- in the US, we do generally give you the freedom to be a dumbass or a smartass or whatever kind of ass you prefer. But payday lenders don't just hurt their clients -- they hurt cities and neighborhoods. They hurt school budgets. They spread decay and accelerate poverty. That doesn't just hurt the clients of the payday lender -- that hurts my entire city. And we're feeling the crunch.
(And my city seeking legislation from the state that would allow us to specifically zone w/r/t payday lenders -- which we currently CAN'T do because they're a legal business and, unlike alcohol, don't require special licensing. So they can come in, destroy an entire business district -- which they do, one after another -- and then leave when it's a ghost town to all go flock to another business district and destroy that one. Over and over. Their negative effect on the city is THAT serious a problem.)
@Esquire99: No, what Eyebrows McGee is saying is that personal finances are just that - personal. But when personal matters leak into the street to affect the community, it's no longer one's personal business, and everyone has to deal with the consequences. It's other people whose lives are being affected because payday lenders have set up shop, bringing along their bad reputations, driving down home prices and dissuading families from moving in because they see the payday lenders.
Payday lenders are just bad in general - they're not good places, they prey on the poor and the desperate, and they are (like Eyebrows said) a cancer on society. Blight follows wherever they go because they turn desperate people into indentured slaves with their outrageous interest rates and sometimes unethical methods of getting payment.
@Eyebrows McGee (on Twitter: LPetelle): \"They can do whatever the hell the want with their personal monetary situations, sure, but the SIX PAYDAY LOAN PLACES WITHIN A MILE OF MY HOUSE are driving down home values and destabilizing my stable, middle-class neighborhood.\" Sounds like a zoning issue, not a payday loan issue. I wouldn't necessarily have an issue with some reasonable zoning restrictions on where they can be located.
I know of only one payday loan location within, say, 5 miles of here. Also one pawn shop. There may be more, but I don't notice them. The strip mall the payday loan place is in seems to be doing OK. That isn't to imply that what you say isn't true in your area, of course.
@Yossarian: I don't have very many close to me, but I also live in a fairly middle class area. If I head toward the more urban areas, they're everywhere. There are payday lenders next to check cashing places.
And lending money at usurous rates hurts the long-term existence of our economy, and our country.
Sorry, but \"people want the service\" isn't a valid reason to slowly flush our economy down the crapper.
@RvLeshrac: If it were, drugs would be legal! And actually, that might really boost the economy. Hmm!
@RvLeshrac: How do you figure that the economy is hurt more by these loans than by the lack of money they provide?
What's your alternative for some of these borrowers? Lose a job because the car can't get repaired? Go hungry until payday? Get the kid kicked out of daycare because they're late with the payment?
Of course, not every borrower is necessarily making the most financially prudent move but people make poor choices daily in all facets of their lives. How much can you nanny everyone?
@Yossarian: Anti-usury laws are nannying? Oh, hell, let's get rid of laws against armed robbery, too. If people can't be bothered to arm themselves, why the heck should we nanny them by paying for a police force?
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I don't like payday lenders and oppose any laws that protect them. However, to Gutierrez's credit, he also sponsored the Consumer Fairness Act of 2007, a bill that would cut back the power of Mandatory Arbitration Clauses:
Unfortunately, it looks like that bill has been stuck in committee since 2007.
@humphrmi: Gutierrez is also the guy who is trotting out amnesty for illegal immigrants and trying to extinguish personal responsibility by using sadsack stories of mothers and fathers forced apart because one of them was in the country illegally, but that doesn't matter because the BIG BAD GOVERNMENT made them get married knowing one of them was in the country illegally.
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@humphrmi: Don't give him too much credit. Alot of bills get written knowing full well that they will forever be stuck in committee and eventually die. \"
\"It is a tale, told by an idiot, full of sound and fury,
Signifying nothing.\"
@CaptZ: Exactly. It all looks really good on paper, but they know it'll never get passed - but the public just gets the \"Candidate X wrote the blah blah blah bill that (small print: almost) sent the evil corporations packing...\"
I find it interesting that while the Democrats love to smear those big mean rich execs who worked hard to get there, they like to take every opportunity to keep poor people very poor.
It's pretty simple, actually. If your entire power base is built on telling the poor people that you're going to fight those evil rich people for them, your entire job security depends on there always being poor people.
(And lest this become another red vs. blue bash, let me point out that the same statement applies to the other side and their supporters as well. Nobody in our current system has the best interest of the actual, individual citizens at heart, if you ask me.)
@kemikos: If by \"poor\" you mean people who earn less than $5million/year, then you're spot-on about which segment each party favors.
Or, put another way: how much have YOU lost in your IRA/401K/investment accounts? That loss is primarily due to Conservative \"innovating\".
Bad headline, Consumerist.
One member of a House subcommittee pushing a bill does not mean the House of Representatives is actually voting on it, much less that it is likely to pass.
Ohh PLEASE big government, PROTECT ME, I'm too stupid to make good decisions on my own!
@Justin Harper: You're right. We'll get that nasty Big Government to abolish all laws prohibiting fraud and deceptive trade practices. You're a big boy, aren't you?
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-483565-100x100.png\")
@BadBoyNDSU: Possessing and using the mechanisms available to a large entity isn't the same thing as being a parent. Can you test for BPA and melamine at home? Can you assess the food value of your grocery purchases absent the government-mandated nutritional information panel on the package? Can you assess the strength of your state's aging bridges before you drive on them?
There may be the occasional parent deluded enough to believe that s/he can do these things, and I'm glad that there's something in place to minimize the consequences for that parent's child.
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-430750-100x100.png\")
@Justin Harper: That's how I feel whenever I see a parent on the news whine about their child playing violent video games or watching violent and/or sex-filled movies.
Sad thing is I often see these people (And people like them) buying their kids these games and taking them to these films without a second thought.
\"Oh, little Johnny wants 'Hooker Beatdown', 'Bloody Mess VII: Guts Galore' and 'Debbie Does D.C'? Sounds perfectly reasonable to me. I mean, if these things were bad for him, they'd warn me!\"
@Keavy_Rain: Yeah, at some point the government needs to protect certain groups of people from themselves. Some people were never fit to be parents - their children shouldn't suffer for their crappy parenting. As in this situation, I think that some people in poverty need to be protected from themselves and their downward trajectory if they were to get a payday loan, or worse - several payday loans - without properly understanding the consequences. And lets face it - anyone who gets a payday loan does not truly have a grasp of the consequences.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-175620-100x100.png\")
I don't necessarily agree or disagree with the sentiment, but those of us in states limiting these loans have decided that we want them.
What I really don't like is some guy a different state trying to enforce his will on us. We made a decision, right or wrong and we'll sink or swim without his input, thanks.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-254590-100x100.png\")
Very true mythago, the majority of bills and resolutions never make it out of committee.
How can a Democrat hate the poor? Isn't that CRAZY!?!
/sarcasm
I don't like Payday loan places either, but not everyone can just wave their hand and have cash when they need it.
My husband and I have to use them now and then to get by, even though he makes over 20 bucks an hour, and our apartment has all utilities paid for. We are sick of snobs looking down their noses at us for doing what we need to to eat, fix our car, and (heaven forbid!) pay for my asthma medicines! For your information, we DO have a budget; a very strict one, which we stick to religiously.
We are not buying stupid crap we don't need, nor are we buying booze and lobster with every paycheck.
We have no credit cards, no cable,(we don't watch TV) no debts except medical (which we are slowly paying off), and no children to waste resources on.
We are not asking anyone to protect us from our own mistakes, but to smear everyone who uses these places as ignorant and foolish with money needs to get their head out of their pants and wake up.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-802739-100x100.png\")
@Vastarien202: Really, that's 80K/year - 4400/mo if you're saying zero deductions. At strict budgets, zero credit card debt, no cable...why don't you have an emergency credit card? Better yet, why aren't you socking away cash in a savings account for emergency funds?
You're implying your only debt is medical, at which point creditors really could care less - so there's no advantage in paying any more than you have to towards those bills. Savings for emergencies is far more important.
Seriously, a credit card with a $500 limit is all you need for asthma medication and it will never be 400% interest. Plus, as you pay it of as responsibly as you have with the payday loans, it will report to your credit and HELP you.
@Stephmo: How do you know what their rent is, or what kind of other obligations they have? What if he is the only one with an income? You don't know where they live. What if they don't want a credit card because of the temptation? What if they only use the loan maybe once a year, so having a credit card for that is pretty uesless, especially if they are trying to stay out of debt?
You don't know their situation. Stop judging them.
When I was making $8/hr and didn't have a credit card, payday loans came in handy. I never got stuck in a cycle. I don't think they are inherently evil, but those who run the payday loan centers like to take advantage of people, and that ain't cool.
@Stephmo: I'm getting half that--20x40 is $800 for weekly income, x52 is $41,600 for annual. That's not dirt poor, but it's tough for two people, especially in a high-expense area. I don't know the credit card industry well enough to say if they'd be eligible or not, though.
Assuming they don't have anything particularly bad on their credit report, they should be able to. Heck, I'm living on a $22,000/yr graduate stipend and have access to $14,000 in credit, though I can't imagine why I'd actually need that much.
@floraposte: Ah - I originally read the \"my husband and I\" as both of them. And the 4400 was both of them take home - it's still median household income in this country.
Either way - if they've taken a payday loan, they can get a $500 credit card. Heck, sock away the money for a prepaid credit card with a $100 limit or whatever the asthma medicine is so you can constantly pay it off. Anyone can get one of those. That would be better than the payday.
This is the payday loan line, \"oh, you'll need emergency cash!\" And then they trot out kids, groceries or medical bills as if credit cards with low balances are impossible to get with fair credit - or if a prepaid credit card with horrible credit is impossible. This is part of their predatory nature - \"don't pay attention to the reasonable options! We're you're only hope!\"
@Stephmo: \"Either way - if they've taken a payday loan, they can get a $500 credit card. Heck, sock away the money for a prepaid credit card with a $100 limit or whatever\"
Oh, right. So when I was making $8/hr and could not get a credit card, I was just dreamin'?
@Vastarien202: Wouldn't it be better for you if you have a \"strict budget\" to just have a credit card with a small limit for expenses that have to be paid now with money you'll get later?
Payday lenders are crooks, plain and simple.
@Vastarien202:
Very well put, particularly since you have experience using these services. The government doesn't need to step in and protect people from themselves, particularly when they are just protecting them from making necessary, though arguably irresponsible, financial decisions.
This isn't going to make a lick of difference. Instead of charging 15% interest on a two-week loan, they'll just start charging a 15% fee with a 15% late charge if the loan isn't repaid within two weeks.
Also, our government needs to stop treating its citizens like children.
@rugman11: 30% on a short term loan is extremely reasonable if the lendee is not particularly credit-worthy. On $500 with a two week term, that 30% is $5.77. I'd be more than willing to pay that.
@Liam Kinkaid: Unfortunately, payday lenders don't work like that. They charge 30% (or more) per period, not 30% APR - your $500 2-week loan would actually cost you $150, not $5.77. How do you feel about it now?
@rugman11:
Nothing wrong with charging 15% interest on a two-week loan, but that's not the only thing they do. They also charge fees for everything under the sun: Fees for paying back the loan before the two weeks is up, fees for simply paying the loan, fees for the loan itself, etc.
Some of the operations are perfectly reasonable, and charge a reasonable rate. Some of them, however, are scum, and they need regulation.
Just like banks. Not all banks are evil, but the banks which ARE evil cause so many problems for those that are not that the entire industry has to be regulated: One bad apple...
The title is misleading, unless someone takes out a loan that they won't pay back for a year.
@MooseOfReason: I know, right? They should just re-state the APR based on whatever the term is, that way it's easier to compare one loan with another. As a bonus, it makes the loan much more palatable. I can see the advertising now!
Low, low rates! Only 13.55% Then, in tiny, tiny print: compounded daily.
The interest rate is presented as an APR so it is not misleading, for the same reason companies' financial statements are presented similarly. But maybe you'd like those to each have different rules applied to them as well?
@Liam Kinkaid: Cite me examples of people taking out a payday loan that they were going to pay back in a year.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-27305-100x100.png\")
@Liam Kinkaid: And the handling fee schedule that seems to be lurking on another document. Fee schedules aren't prominent either.
My problem with payday loans is that they turn stupid or desperate people into indentured slaves. The escalating nature and huge interest rates on these loans when someone can't resolve it within the initial time frame is putting people in a horrible situation.
While it might not impact me personally since I have no intent of ever using a legal loan shark it impacts those that do. That means another person in the community is having their wages leeched off of so they can't feed their kids, pay their bills etc. There are already too many people in the city I live in who can't make basic ends meet. We don't need to be making that worse so some jerk can run a get rich quick scheme.
Preemption sucks. States need to start suing the federal government.
I am wondering if this will void the state laws because this might be a 10th amendment issue. One of the reasons why the interest rate is so high compared to a subprime loan for a house or car is that they don't require collateral. Also the loans are short term so two weeks is different than a five year loan with 10% down and collateral.
It's a weird approach that this Rep. Luis Gutierrez is taking here. He complains that the lending insustry has lobbyinsts and are powerful, so he is giving some of the things that they want. He and his party control Congress, why doesn't he just tell them to go screw themselves?
@HiPwr: Gutierrez has received numerous campaign contributions from cash advance and payday lenders.
It's all in the FEC documents at fec.gov. Cash America and Advance America both gave money.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-439678-100x100.png\")
@HiPwr: I think I see now...He's setting up a \"compromise\" with the lenders where he bans a couple of their most profitable practices in exchange for multiplying their interest rate cap by x100.
He'll talk trash on the payday lenders while they protest him taking away their little schemes.
It TRIES to make everyone look good but in the end only really makes the lenders more profitable
@HiPwr: Yeah I'm kind of confused by his intentions. \"Legal\" has a connotation with people - if it's legal, it must be good. I don't want people going to payday lenders because it's NOT a good way of getting money, but if it's legal it must sound like a good idea, right?
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-79408-100x100.png\")
man! such shit burns me to no end..
Georgia got rid of the payday loan but has the just as bad Title Loan. Take out a loan against your car, you miss a payment, they repo the car and sell it. Even worse, the lender pockets the difference between the loan amt and the sale price.
It's just your congress at work. The best paid government in the world. Give a congress man enough money and he or she will lick your shoes for you. Mr. Gutierrez is from the state of Illinois and the great City of Chicago, and he should be representing his people, instead he is selling himself the the highest bidder. I once admired him, no more. I am growing tiered of electing people that claim they are for the people, but instead are lap dogs for those who have the do re me.
Mr. Gutierrez should not be a congressman. He has demeaned this office.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-154038-100x100.png\")
My cousin did a duece at Marion in the 80's for charging a small fraction of what these guys charge. And his default terms were far more generous.
In 1986 it was called Usury. Largely because it was being done by guys whose last name ended in a vowel. Now it's a \"legitimate\" industry charging 10-20 times as much. But since the right people are the ones making the profits, they have taken what was once considered a crime, and now made it not just legitimate, but they try to make this travesty look like they're doing poor people a favor.
My cousin Tony deserves to have his record expunged. Oh wait, he didn't contribute to any political party or campaign. So that will never happen.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-21984-100x100.png\")
@drdom: The basketball arena at University of Tennessee Chattanooga campus is named for a cash advance nimrod business owner who donated money to rehab it back in the late 1990s. He and his family looked absolutely -NOT- like university donars when the rehab/new name was dedicated...
The majority of people who take these loans are poor people with terrible money management who usually have more kids than they can afford and live 'hood rich` anyhow. I'm for this bill because let capitalism exploit the weak.
@Randy Treibel: Oh, I see. So when I used to use these loans, because I was making $8/hr and couldn't always make rent on time, and I didn't own a car, and I didn't even have cable TV, or kids, I must have been living \"hood rich\"! Damn, I didn't know that! Those kids must have been INVINCIBLE! I thought I was just broke and having a tough time making rent on time occasionally! Guess I was wrong, thanks for the lesson!
Do you have proof to support your statement?
I'm just assuming since you are talking with such authority on this manner, that you must have proof.
People who use payday loans tend not to be the really poor. The truly destitute tend not to have jobs or bank accounts, two things required to get payday loans. The people who can't even qualify for a payday loan typically end up having to patronize pawn shops and title loan businesses for their short term credit needs.
@Randy Treibel: Wow...I thought maybe there could be discussion without reducing to pure hatred for the poor. Way to make assumptions about ALL people. It's one thing to believe a fraction of people are like this, but blanket assumptions don't do anyone any good.
@Yossarian: As opposed to opening a regular payday loan operation, where I can \"help\" others in the short run so I can get rich screwing them in the long run? Gee, can't I just open a clinic getting the desperately poor to sell me a kidney for $1K a pop?
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-932865-100x100.png\")
It would be interesting to see the campaign contribution lists.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-39117-100x100.png\")
@Yossarian: Who said they don't? My local credit union has plenty of options for short-term loans -- but they don't advertise those heavily, whereas someone making ridiculous amounts of interest and fees has much more incentive to be an in-your-face available option for folks who don't know that they can (and should) call around to find their available options.
\"Someone... needs to step up and punch the payday lending lobbyists in the face.\"
No, I think somebody needs to be arrested for advocating violence.
Consumer protection should be about curbing dishonesty, deception and trickery in business dealings, NOT telling independent merchants and service providers how much they can charge. You are trampling on basic freedoms here, leading us towards a 1984 state where all activities are controlled by politicians and those who bribe them.
Regulate loans by requiring that they be presented clearly, so people understand exactly what they are getting into. Apart from that, let lenders choose their own prices and let consumers decide for themselves whether they think a loan offering is a good thing for them. Anything less than that is paternalistic authoritarianism.
This would not stop the government from helping the poor through direct assistance funded by taxation. Basic freedoms do not need to be trampled on.
@TruthAboutPDL: Regulate it federally. That's what the AP article saying at the crux of the issue. Interest caps. Ban on Rollovers.
@MandaCeryneian: I'm not big on punching people in the face myself. But I'm not sure why you're linking only restriction of business to campaign contributions, since such campaign contributions are more often to be given in the hope of avoiding restrictions--as in this case. You're arguing like this is a victory for the free market, and it's an example of the very situation you decry.
Dear Ben:
Your blog is, on the whole, excellent. The extent to which you inform consumers on the many issues facing them is to be lauded.
You should therefore screen your posts more carefully. Tonight's post from \"Carey\" regarding payday loans manages to show so little
understanding of the issue that in only 5 sentences, the author torpedoes his credibility and damages the blog's value.
\"A House subcommittee wants to legalize payday loans with interest rates of up to 391%.\"
Payday loans are already legal in 38 states. The Gutierrez bill merely places unreasonable fee caps in the states that do not currently have legislation.
\"Lobbyists from the payday industry bought Congress' support by showering influential members, including Chairman Luiz Gutierrez, with campaign cash.\"
While influential members such as Sen. Durbin also receive enormous gifts from banks -- direct competitors to payday lenders.
\"The Congressman is now playing good cop, bad cop with the payday industry, which is pretending to oppose his generous gift of a bill.\"
Carey has absolutely no idea what he's talking about. In point of fact, the industry OPPOSES this bill for many reasons. The most significant one is the fee cap proposed will make it difficult for many lenders to stay in business in several states.
\"After watching members of the military fall prey to exorbitant payday loans, Congress in 2006 capped the interest rates for military payday loans at 36%.\"
False. The DOD report which initiated the legislation blamed debt in general for possibly affecting military readiness. Payday loans were NEVER mentioned.
\"Congressman Gutierrez is competing with Congressman Joe Baca to see who can author the biggest giveaway.\"
False, per above.
\"Someone-maybe Carolyn Maloney, who did an excellent job with the Credit Card Bill of Rights-needs to step up and punch the payday lending lobbyists in the face.\"
While \"Carey\" advocates violence against lobbyists, he shows absolutely no knowledge of payday loans. His previous posts, as well as those of Meg Marco, show utter ignorance regarding the product.
This ridiculous picture of Gutierrez saying \"I hate the poor\" shows the ignorance of your editorial staff as well.
I would like to submit a rebuttal to these outrageously misleading articles so that your readers can be honestly informed about the pros AND cons of the payday loans, rather than rely on the falsities your authors repeatedly post.
The least the Consumerist can do is present intellectually honest material for readers.
Here's a good place to start: paydayloanfacts.org
@TruthAboutPDL: I took out a payday loan when I was in the Air Force living in the barracks. We weren't paid much and it seemed like a good idea at the time. Of course paying back the massive interest sucked, but I learned my lesson and never did it again. I knew what I was getting into, though. I chalk it up to my own immaturity at the time.
@HiPwr:
You took responsibility for your actions. Good.
Now, let me ask you this. The government has taken away your right to get a payday loan.
If you are in need of short-term cash, where can you go to get it? Does the military offer a program of some kind?
@LittleNell:
And in the typical anti-PDL response, you provide no evidence, no facts, and nothing to back up your position.
You say, in fact, nothing.
Meaning you know nothing about the issue.
Do you always open your mouth when you have nothing to say?
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-388919-100x100.png\")
@TruthAboutPDL:
>False. The DOD report which initiated
>the legislation blamed debt in general for
>possibly affecting military readiness. Payday
>loans were NEVER mentioned.
If Carey got the \"false\" idea that lawmakers had targeted payday loans for military members, he's in good company -- the Navy seems to think that happened as well.
But this being the Internet and all, we can go directly to the source. From the actual report's introduction:
\"Description of the prevalence of predatory lending around military communities - reviewing payday lending, internet lending, car title lending, military installment lending, rent-to-own programs, tax refund anticipation loans, and coercive collection actions.\"
The phrase \"payday loans\" appears in that document 65 times, which is considerably more than
>NEVER
Did you think we wouldn't bother to check?
You made the same mistake Congress did. You read the report prepared for them, and NOT the ORIGINAL 1 1/2 page DOD report, in which it never even mentions payday loans.
Be an adult, do a FOIA request, read it, then come back and retract your statement.
Did you think you really had the answers?
@TruthAboutPDL: As long as you're busy double-posting, let's play with a second argument.
\"After watching members of the military fall prey to exorbitant payday loans, Congress in 2006 capped the interest rates for military payday loans at 36%.\"False. The DOD report which initiated the legislation blamed debt in general for possibly affecting military readiness. Payday loans were NEVER mentioned.
Your response is a bit of a non sequitur. Which part of the original statement was false? Is it the
After watching members of the military fall prey to exorbitant payday loans
part? You admitted in your response to my post that Congress read the report prepared for them, which says precisely this. So that's not the false part.
What about this part:
Congress in 2006 capped the interest rates for military payday loans at 36%.
Is that the false bit? No, because that's on page 184 of this PDF of the legislation.
So did you just say something was false that was actually true?
1) The ORIGINAL 1 1/2 page DOD report never mentions payday loans.
2) Those members of the military who used payday loans irresponsibly were no more or less likely to than regular consumers.
3) Those that use the product irresponsibly make up less than 5% of all customers
4) Those that use the product irresponsibly can ask for a repayment plan if they find they cannot pay off on time. This is a CFSA Best Practice Policy.
5) Congress did enact this legislation.
@PunditGuy:
You made the exact same mistake Congress did. You read the report provided to them.
What you did NOT read was the 1 1/2 page report from DOD itself, and NOWHERE in that report does it even mention payday loans.
So be a grown-up, do a FOIA request for that document, then you can retract your incorrect statement.
@TruthAboutPDL: So I shouldn't read an 88-page report, readily available, from the DoD, on the topic that you brought up -- I should instead read a 1 1/2 page report, supposedly from the DoD, that I need a FoIA request to get, that you say says what you say it says.
Go away now.
@PunditGuy:
Well, this is quite typical. You simply do not know what you are talking about.
I've read the 1 1/2 page DOD report that your vaunted 88-page report is partially based on.
But you are too wrapped up in your own ideology.
Tell you what, if I produce this report for you, and I'm right, will you
1) apologize, and
2) Admit you were wrong?
@TruthAboutPDL: I cited and linked to a report that says the opposite of what you argued. You cited as proof a document that you didn't share with us. And I don't know what I'm talking about?
Tell you what, produce your document, I'll look it over, and probably wonder why you think it contains better information than that larger document that is also from the DoD, and was apparently shared with Congress (by your own admission) and used as a basis for legislation. Which is precisely what the original post said, which you tried to refute. Makes one's head spin.
So if you produce a 1 1/2 page document from the DoD that says what you say it says, how does that prove that the original story was false?
@ironchef:
Is that how you respond to arguments? You rely on a CBS News report rather than do your own research.
Go back and watch it again. Why don't you see how much time they devote to the PDL side of the argument?
Have you ever read the P&L statement of a payday loan store?
Have you ever visited one? Used a payday loan? Spoken to more than 20 customers?
No? Then you know nothing.
@TruthAboutPDL: The 60 Minutes piece is quite enlightening.
----\"Have you ever read the P&L statement of a payday loan store?\"
no, but since there is now more than 22,000 pay day loan operations (more stores than actual McDonalds franchises in the US) leads me to believe it's pretty damn lucrative. I'm sure you wouldn't share those P&L figures publicly either.
----\"Have you ever visited one? Used a payday loan? Spoken to more than 20 customers?\"
Don't need to. I think 400% interest + high fee schedule speaks for itself.
Paydayloanfacts.org seems to blame the customers...
examples:
\"Are you a \"victicrat\" -- one who believes that people are not responsible for their own actions and are the victims of other\"
\"Do you believe you are responsible for your own actions? \"
Wow...to say that to justify the ethically-questionable practice of usury.
@ironchef:
You are vastly uneducated and your logic is poor.
\"but since there is now more than 22,000 pay day loan operations (more stores than actual McDonalds franchises in the US) leads me to believe it's pretty damn lucrative.\"
WHo cares how many stores there are? What that indicates is that demand exists for the product. 154 million transactions in 2008. Meanwhile, payday loans provide short-term credit for people who need it. McDonald's provides nothing but empty calories and, in the case of obese people, causes harm.
Who cares how lucrative they are? Is there a law that says a company's profits must be limited?
Here's a quiz for you. How much out of every dollar that payday lenders collect in revenue actually ends up as real profit.
Take a guess. Go ahead.
\" I'm sure you wouldn't share those P&L figures publicly either.\"
This shows how uneducated you are. There are 6 public payday loan companies. Their P&L statements are reported every quarter for you to read yourself. If you dare.
Your response to visiting a payday loan store? You say you wouldn't.
Why not ask customers themselves?
\"Wow...to say that to justify the ethically-questionable practice of usury.\"
So you do not believe that a customer bears ANY responsibility?
Were they forced to take out a loan?
As for the \"usury\" claim, that's also misleading.
You are the typical opponent of payday loans. You look at the issue emotionally. You have no facts. You casually toss around words like usury without knowing what they really mean.
Why be so surprised? This is the FREE MARKET at work.
Never underestimate the power of big business to screw the consumer.
@ironchef:
How do payday loans \"Screw the consumer\"?
Tell us: If I need $300 to get my car fixed and I don't have it, where can I go?
@TruthAboutPDL:
-Pawn Shops.
-Ask for a pay advance from your boss.
-Friends and Relatives.
-Garage sale
-Microloans [www.rateladder.com]
PDL loan industry didn't even exist a decade ago. America was doing just fine without them.
Look at all these satisfied customers...
[www.consumeraffairs.com]
@ironchef: 1) Pawn Shop - What? I don't want to pawn something precious! Although I sure hope i'll have what I need to repay that loan, if I don't, they can take my property and sell it. And, by the way, the loan fee to pawn is about the same as paydayl. So, WRONG.
2) Pay advance from my boss - What? I've already tried that before. He said \"no\". I'm not stupid. WRONG.
3) Friends and relatives - WHAT? I'm too embarrassed to ask them. Besides, I need the money NOW to fix my car. WRONG
4) Garage sale - ARE YOU INSANE? I need the money NOW to fix my car to get to work. It's Tuesday. I don't have time to set up a garage sale and there's no guarantee I'll raise the money.
5) Microloans. I said I need the money NOW. Those will take weeks.
And by the way, since payday loans were used 154 MILLION TIMES in 2008, don'tcha think maybe that was done BY CHOICE by people who considered all your options and decided against them?
You have no idea what you are talking about. Your every argument has been slapped back at you.
@RosalbaMania: Still no excuse to let legalized usury hose consumers into debtor's oblivion.
Fees, 400% interest, rollovers, entrapment, and fine print shinanegans. This industry is ripe for reform.
@TruthAboutPDL: the 60 Minutes piece outlines a case where a Paydayloan operator wants $10,000 in fees and interest for $2,000 loan.
Where can one go to help pay off the Paydayloan?
@ironchef:
You didn't answer my question. I need $300 to fix my car. Where can I get it?
As for the 60 \\Minutes piece, you got it wrong. This ONE PARTICULAR irresponsible borrower borrowed more than they could afford, and kept taking out loans.
All they had to do was ask for a repayment plan.
why are we worried about $4600?
any limit, 391% or otherwise, the federal government establishes is going to be too high.
it can't be too low or they'll all go out of business. the government isn't in the business of putting people out of business, not yet anyways.
and it can't be \"just right\" because the government shouldn't be in that business either. it's a ceiling for a reason, everyone's going to try to hit it.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-946901-100x100.png\")
I'm in favor of some kind of regulation. It's easy to dismiss these kind of places if you've never needed one, but if you ever get into that kind of desperation, for many people it offers an initial quick fix, but afterwards you find yourself caught in a vicious circle from which it's almost impossible to get out of. I know, I was in that sort of situation, and it took a near-desperation method to dig myself out. There was a time I was rotating loans from 3 different places because I had problems paying my rent and buying food. It's not a fun place to be in, and payday loan places know this and prey on it.
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-277470-100x100.png\")
Congress is still pandering to lobbyists. There is no room in Washington for special interests or well paid corporate lobbyists. I seem to recall that Barack Obama (during his campaign) said it's time for the lobbyists to leave Washington. I bet it never happens, not while congress collective wallets are being filled by lobbyists.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-405274-100x100.png\")
Despicable!
Where I currently reside, WV, there are no Payday Lenders. What we do have are video poker machines about every 2 or 3 blocks (masquerading as coffee shops, hangouts, and what have you).
Three minutes over the bridge, in OH... Payday lenders, about every 2 or 3 blocks.
I know there's some personal responsibility to be had on the consumer's part, but I really don't know how people can get rich from either (payday lending or video poker) and feel good about themselves at the end of the day.
The fees on Payday loans are spelled out. If you don't want to pay a high interest rate on them then don't use the service. The loans are extremely risky for the lender making them. If you walked into a car dealership and were offered a car loan ar 300% interest, would you take it? And if yoo do, is it the car lenders fault that you did?
It's called usury. Look into it. The damage goes way beyond desperate people who ignore the fatal consequences.
400% APR.....Now that's what I call Predatory Lending!!!!! It's like going to a loan shark, only without the broken legs thing.
rememebr these are microloans, they dont' charge by apr they charge a falt fee (10 ~ 15 per hundred barrowed.) its the banks that for it to be listed as an apr.
sure its a high rate for cash, but if you have bad credit its better then bouncing a check.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-605077-100x100.png\")
Wow, payday lenders are powerful? They are only as powerful as you let them be. If you want to regulate them you can. There is no reason to charge people 391% interest on a loan. The mafia doesn't even charge that! Gutierez is only giving the payday lenders what they want in return for campaign contributions.
@Eyebrows McGee (on Twitter: LPetelle): Hey guys, I have this one example of this thing that I kinda know about.
The fees for these loans are crazy and they are predatory in nature, but find a bank that wants to operate in a challenging neighborhood.
@Blinky987: Sure. Shore Bank, for one:
Which I'm pretty sure has locations in Rep. Gutierrez' district.
I absolutely loathe these places. It disgusts me that it's legal for them to charge so much. They are suuuch a shady bunch. At the same time, I have customers come in weekly wanting to put stop payments on checks they've written to payday loan places, and trying to evade payment through other means as well. There has to be some happy medium, and that's where the government needs to step in. These places need to charge more for a high risk loan, but they should not be allowed to rake these people over the coals just so they can pad their pockets.
@chocolate1234:
They don't. 27 states have laws that provide specific fee caps and other regulations.
Nobody is being \"raked over the coals\". Do your research before making a comment.
Perhaps in your state they have a fee cap, but in my state they certainly don't. In face, if it is true that 27 states have these caps, then it doesn't take a genius to figure out nearly 1/2 the states don't.
So actually, people ARE being raked over the coals.
Am I the only one here who has actually used these loans? I've only used them maybe 4 times, never more than $200, and it was always for rent (the loan fee being cheaper than the late-rent fee) due to payday being a week or two away. If used responsibly, they can be very useful. I never had ANY problems. I didn't rollover the loans. Indeed, I almost prefer it over using my credit card for a \"loan\", because I would have them cash the check the day the loan was due, and I would be unable to go, \"oooh, I'll pay it back next month...\" This was all several years ago, when I was still young and trying to stay afloat.
I wish it wasn't so easy to abuse and overuse these payday loans. It's a great idea that has been taken over by loan sharks, which sucks. All payday loan centers need to be able to talk to each other so you canNOT take out more than one loan at once, and you shouldn't be able to roll a loan over more than once, and you should *always* have the option of paying it off in a payment plan.
I don't consider the fee an \"interest rate\" btw - I always considered it a fee for using the service.
I certainly don't like these businesses, but what alternative will people in desperate situations have? I went through a short period several years ago where I needed a payday loan. I had some medical expenses pile up, was underemployed, and had already maxed out my credit. If I could not have gone to a PayDay Lender it is likely I would have fallen even farther behind on my rent and would have been evicted. Yes, I was irresponsible for not saving money prior to this emergency. But what other alternative did I have? If the PayDay loan business is eliminated what alternative will people in similar situations have?
Payday loan places are absolutely evil... It's just legalized loansharking.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-326595-100x100.png\")
And here I was, hoping a Latino Congressman would help the people in his community.
And here I was, hoping usury laws would one day come back.
I think I'm too hopeful.
@dumblonde:
I think you are a dumb blonde. You don't know what you're talking about. Payday loans help responsible borrowers.
Latinos are just one section of the populace that is thankful they exist.
Maybe if you actually visited a store, talked to consumers and owners, and did a little research you'd learn something.
Usury it isn't: [www.bloggernews.net]
Yes, consumers would have to be pretty stupid to pay $15 for a two week, $100 payday loan . Unless, of course, they're going to have to pay $50 to reconnect their telephone, $100 to reconnect their cable, or bank charges that average $28.23 for a bounced check, and $56 in overdraft fees. Then taking out a payday loan is a very sensible move.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-400379-100x100.png\")
Everyone should read this article before commenting on PayDay loans, unless you yourself use them: [www.nytimes.com]
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-685967-100x100.png\")
Thankfully I go to the Mafia for all my emergency money needs.
Well they shower politicians with our cash, why wouldn't the politicians shower them back with our cash?
You people are getting outraged without getting ALL the information. All you are seeing is the 391% and knee jerk reacting to that. Notice how the bill states a CAP at 391%
How much interest are they being charged now at a maximum, with fees and fines? This does not mean they WILL be charged that rate. It limits the industry to charge whatever they want. If you can tell me what the high point is for payday loan interest now, and then compare it to the bill, maybe then I'll be outraged.
The problem I have with these places it that it would be more economical to go to an actual loan shark at the risk of losing your legs.
These places are worse than banks, in almost all situations. I don't care if they fulfill a service, when that service costs an exorbitant amount of money, and targets a lower income/economic knowledge bracket, a lot of room for abuse exists.
If they want to stay in business, then they definitely need a form of regulation.
I don't like the idea of curbing a business' income abilities, but I mean come on...391% interest rate for a loan? That's beyond ridiculous. Even 50% is insane to me, and should be alarming to anyone who ever intends on using one of these places under those stipulations.
I think I remember seeing Gary Coleman pimping one out and they were at something like 99% interest. CashCall I think it was. Whatchu talking about Gary?
Screw That.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-54738-100x100.png\")
Wow, for just $4,600 you can buy your own politician and make millions.
Amazing what these whores will sell themselves for.
This is just another example of our congress in action.
payday loans should be banned from all states and or capped at 36% or less(mostly less). But when you have the best congress that you can buy what else should we expect..
term limits for congress should follow, quickly
This is the letter I hastily wrote on the Contact a Congressperson website - you can too if you like, but there's some red-tape - just say your zip code is the congressman's home office and you can get through:
It is being reported by a Consumer advocacy website (http://consumerist.com/5198880/house-preparing-to-legalize-payday-loans-with-391-aprs) that you are advocating allowing Pay-Day Lenders the right to charge an interest rate of 391%. I am an Illinois native who routinely is made to defend the Democratic party of my home state from charges of flagrant abuses of power.
I sincerely hope this lending rate in your bill is some kind of gross oversight on the part of an overworked staff no doubt over-burdened by the enormous undertaking of fixing the global economy. Please ensure before this bill is brought to a vote, however, that a reasonable interest rate replaces this laughably awful three-digit interest rate. Something more in line with the Federal Reserve's rate - the amount we're lending to corporations who have proven incapable of handling billions of dollars - would be fair to consumers trying to feed their families, pay their phone bills and fill their gas tanks to drive to work in a cold Chicago early spring.
As I'm sure you know, many of your constituents are lured by these pay-day loans to help pay off their living expenses when their savings are tapped out. You'd be hard-pressed to find millionaires lining up at Check-Into-Cash and its ilk any day of the week - these businesses are built to assist people living \"paycheck to paycheck.\" However, an interest rate of 391% only perpetuates the culture of bad-debt and \"easy money\" that has sunk this economy.
While noble in principle, these businesses have been accused by every advocate of consumer rights of predatory lending. Allowing an interest rate of 391% leaves the word \"predatory\" behind and becomes worse than \"criminal,\" \"evil\" or even just plain \"Lex Luthor-ish\" in its woefully unfair imbalance of money lending. I understand these companies offer money to people who occasionally are unable to pay promptly, which can effect the company bottom line - but seriously? 391%? It throws your own credibility as a civil servant into question, so I urge you to correct this oversight post-haste. Presenting this bill to congress will put your name on an interest rate that is, to be quite frank, an act of vindictive and cruel lending made with absolute contempt of the working poor in America. I don't presume you have a craven hatred for the working poor in this country but quite frankly Congressman, the literature of this bill does. So, again, I hope you look into it and correct the error.
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Once again, can we please drop the APR? We're talking about loans that shouldn't live past two weeks, generally. The scummy practice of rolling over their debtors may sound like turning a bad two week loan into a usurious year-long debt, but that's an entirely separate issue altogether (and is primarily damaging through fees, not rates). This is like the supposed 2500% APR that banks are charging on overdraft fees: it's a ridiculous form of comparison, even between legit loan products like credit cards and mortgages. Let's not cloud these issues with scary looking, yet irrelevant numbers.
I think people need to stop thinking about the APR of a payday loan, instead think about the fee. These are short term loans, for smaller quantities of money. If someone is taking out a loan, they pay a fee (a percentage probably ~15%). The APR is if they kept on paying that fee over and over again over the course of an entire year. These are loans that are only meant to last about 2 weeks.
Imagine if there are two people each taking out payday loans of the same amount. One person's payday is in a week, the other's is in 2 weeks. The person whose payday is in one week will have a higher APR than the person taking out a loan for two weeks. Each customer pays the EXACT same amount for their loans, even though the APR is completely different.
I understand that the problem arrises with rollovers and the inability to pay back a loan. Well, in response to that, there are payment plans in place at many payday loan locations. These payment plans can cover a range of months, giving the customer plenty of time to make small payments that they can afford and get themselves out of debt.
I'm all for some payday loan regulation: Reporting customers between businesses/establishments so that a person can't get themselves in a ton of debt at the same time (for example). There are plenty of ways to make payday loans less predatory, but capping the APR is not the solution.
I really don't understand what the problem is. I'm just a normal guy that don't have any clout, but it's us that are taking these loans out. I borrowed $300 from cashloancity.com last month to pay for things the kids had to have that week. I paid it back and everyone was happy. Is this nothing more than a political exposure subject? Go after credit card companies if you are serious about high interest and charges. They Charged me $40 for being one day late, and charged me another $40 because the first $40 put me over my limit. Oh but that's completely alright because of the power they have over Washington right?
Thank you,
Ray
Those rentacenter type places have higher APRs
Ah ha! So you slap HUGE interest rates on the poor so they'll scream bloody murder that they're being oppressed and come running to you to demand more entitlements. I see what you did there.
I am blessed that payday loans were not available when I was dirt poor. It is possible that I might have gotten caught in rolling over the loan. It has been repeatedly asked What will people do when they need $300 to repair their car, if not for PayDay Loans? Well we used pawn shops. we used them and used them and used them. The loans were secured by the item we pawned so if we could not redeem our property, that is if we could not make good on the loan, we lost our property. But even thou (sp) we could not repay the loan our obligation was done. no fees, no higher rate, no ever deepening pit of debt. We lost our property twice. Those were the last two loans/pawns we made. I would not like to relive the Pawn Shop Days but I am glad I had the option when I needed it.
How can a federal law preempt a state law? With laws like these, the fed can set a high cap and the states and set lower ones or ban the practice. It is the same with minimum wage, the federal level is the lowest and states can only have higher a level. Whatever favor the citizen most is usually a level set by the states.
One wonders if the events of the past are ever truly learned or improved upon. Going back to Biblical days, the lenders of money were driven from the temple steps. Shakespeare depicted the evils of userers in the \"Merchant of Venice\". A cursory study of the Carlyle group, Haliburton, Blackwater, Duke Cunningham shows us that we have learned nought, that we eschew the justice system either by inner contamination, or lack of required legal action by people who have the interests of America at heart.
The average bank overdraft = $36 The average overdraft fee = $27.
Short-term lenders are offering an alternative product that charges an average of $15-$20 per $100. Common sense economical decision for the consumer facing a choice.
So much so that major banks and credit unions are beginning to offer similarly priced products. The catch, they automatically garnish an automatic depositer's next paycheck to avoid risk and in many cases, shorten the term of the loan.
In states where APR caps have made payday loans unsustainable, the average bank account holder paid nearly $541 in fees annually. In states where payday loans are accessible, that amount is only $240.
These are the indisputable facts as researched by such unbiased thrid parties as the FDIC and Bretton Woods. they make a clear case for maintaining the availability of these products.
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I don't know why some people are always against these payday loans. Most of them raise a point that the APR is very high. But they should understand the nature of such payday loans. These loans are mainly taken with a repayment date of a week or two. so there is no point in talking about something like 300+ APR rate.....
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I don't care what rate they charge because I will never use one.
@rdm: I've used them. They have come in handy when I was temporarily short on rent because paydays got funny. I didn't have a credit card until last year. If used CORRECTY and RESPONSIBILIY, payday loans can be a usefull last-minute loan. I always knew I'd have the money in my account when it was time to pay it back (and indeed, I'd just allow them to cash the check instead of having to go back in). Never had a problem.
It really bugs when people get all snotty, \"Oh, I'm better than y'all and would never, ever, ever need to use one of these!\"
@rdm: Well, I'm kind of with you on this one. I don't use credit cards either, on principle. I've got student loans and plenty of other things I pay on time to keep my credit ok. I know what you'll all say, but Friday, don't you need a 40k line of credit in case of emergency?? No, I have a savings account.
@rdm: I haven't used one either and can't see myself using one. However I care about friends and family who might. I care about the world I leave for my kid too.
@rdm: Seriously, don't even tempt fate.
I was laid off on Friday - completely out of the blue - so never ever underestimate how much life can take a u-turn on you.
@rdm: Brought to you by the guys who think 36% on your credit cards is reasonable too.
@rdm: NEVER.....EVER....say never.
@rdm: Err, the world is - shockingly - bigger than you.