Well, it looks like payday lenders have their backs up against the wall. Things are getting so bad that they are making voluntary changes. According to yesterday’s WSJ, payday lenders are willing to:

• Place a ban on advertising loans for “frivolous” purposes such as gambling, entertainment or vacations
• Add language to all marketing materials warning borrowers that “payday advances should be used for short-term financial needs only, not as long-term financial solutions.”
• Introduce an extended payment plan that may be used once a year for those who can’t pay their bills on time.

For those of you not familiar with payday loans, they are essentially short-term loans. Let’s say things are tight and you need $100 to pay the electric bill. You go to a payday loan company and write them a check for $115 (they usually charge $15 per $100 loan). You walk out with $100. They won’t cash your check for a certain period of time (usually two weeks). If at the end of the two weeks, you don’t have enough money to cover the check, the lender will be more than happy to roll you over into a new loan (with another $15 or more fee). This is how most people get into trouble. According to the WSJ article, the typical client of a payday lender takes out seven loans per year.

Will these changes make any difference? I doubt it. — JLP
Payday Lenders Strike a Defensive Pose [WSJ]
(Photo: hanneorla)

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