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With the threat of stopping their charitable contributions, Rent-a-Center strong-armed an Ohio food-bank into dropping out of an anti-payday-loan advocacy group. The interest rates Rent-a-Center charges can come to as much as 782% APR. [WSJ]
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Research shows that, despite charging high interest rates, payday lenders don’t make much money than typical businesses. [Credit Slips]
Are you trapped in a payday loan death cycle, or have a friend or family member who is? See, the problem with a payday loan is that some people aren’t able to pay the first one off (if you don’t have money in the first place, you’re not going to be any better off two weeks later!), and then have to take out more and more loans to cover each loan they couldn’t pay off. Not only is there high interest, there’s fees. A former PayDay loan lender on personalbudgettraining.com shares his advice for breaking out of the debt trap.
If you can’t get out of this right now, start by advancing $50 less per pay period. Take the difference of what you were paying us in fees and start paying it into an emergency fund. Grab a job delivering pizzas, babysitting, whatever, and pay it into an emergency fund. Borrow less and less from us. Use the EF for actual emergencies. Once you are out of this, don’t get back into it.
Earn more, borrow less, and pay off more.
New Hampshire will become the latest state to keep payday lenders from gouging their patrons. A measure passed by the legislature will cap interest rates on payday loans at 36%, a drastic change for an industry used to bludgeoning underbanked consumers with interest rates exceeding 500%. Payday borrowers spend an average of $793 trying to repay a $325 loan. Let’s see how the economic leeches spin this as a loss for consumers.
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“If it sounds like legal loan-sharking, it’s not. ‘Loan sharks are actually cheaper,” leader of the Ohio Coalition for Responsible Lending, talking about payday loans. [CNN Money]
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Soldier robs two banks because he was $30,000 in debt to payday loan agencies. [Seattle Post-Intelligencer]
PredatoryLendingAssociation.com is a clever parody site mocking payday loans and the efforts of groups like the The Community Financial Services Association of America (CFSA), a lobbying group that tries to make the loan sharks look like respectable financial institutions.
Usury is good for you. That’s the lesson from an article in today’s WSJ using empirical evidence to defend the practice of charging 200% interest rates.
In a victory for consumers, Washington D.C. effectively outlawed payday lending today with the passage of the Payday Loan Consumer Protection Act capping lending interest rates at 24%.
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“My company was deliberately targeting minority people for a continuous loan process that they would never, ever get out of. ” – Bill Harrod, Former Payday Loan Manager. [NBC4]
That’s a lady who is finally digging herself out of a payday loan hole with the help of a “non-profit” payday loan. At one point, Truckey was paying $600 a month in finance charges alone. Now she has a new loan through GoodMoney, operated by local credit union. The new loan’s APR is only 252%, about half what she was paying before.
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Payday lenders in Oregon are closing shop in the wake of new regulations that cap the maximum interest of any consumer loan at 36%.
The FDIC has announced a program designed to study and encourage small dollar lending programs designed to compete with payday lenders. Under the program banks would offer “loan amounts of up to $1,000, mandatory savings components, payment periods that extend beyond a single pay cycle, interest rates below 36 percent, low or no origination fees, no prepayment penalties, prompt loan application processing, and access to financial education to help with asset building.”
Seven big payday loan chains are extensively bankrolled by brand name banks. Bank Of America, Chase, WellsFargo, U.S. Bancorp, and Wachovia all extend tens to hundreds of million dollars in lines of credit to these predatory lenders who charge several hundred percent interest on cash advances, often made to the poor and uneducated.
While we chided Maxed Out for not discussing consumer self-empowerment, the movie did make two very interesting claims:
One in four utilities bills is paid in person, and often the transaction takes place within a payday lending establishment, according to a new report by the National Consumer Law Center. The report finds that there are over 650 licensed payday lenders serving as bill paying facilities for 21 public utilities companies, including 206 working for AT&T alone.
Here’s a video confession from the former manager of a Virginia payday loan center.
According to a report by the National Community Reinvestment Coalition (NCRC,) banks are predominantly concentrated in wealthy neighborhoods, leaving poor and minority communities without access to basic financial tools such as checking and savings accounts. The NCRC compared bank locations to minority and income data provided by the census. The findings suggest that banks are redlining with devastating consequences.
This report shows in 24 out of 25 MSAs [Metropolitan Statistical Areas], urban areas that have dense populations have fewer bank branches — therefore fewer mainstream banking opportunities — than the less populated suburbs. Without the ability to build relationships with the regulated banking community, working class and minority neighborhoods are more likely to use “fringe” services, such as payday lenders and pawnshops, for small loans. They are also more likely to have their home loans originated with mortgage brokers and subprime lenders, which often led to foreclosures and unmanageable monthly payments.
Houston, Philadelphia, and Los Angeles showed the greatest disparities, compared to the relatively equitable distribution of banks in San Francisco, Seattle, and Boston.
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