rssReport Reveals Cyclical Nature of Payday Loans
Friday, July 10, 2009 at 10:16 am
- 14 Comments
Consumer advocates for years have warned that the payday loan industry preys on low-income borrowers who become reliant on one loan to pay off another — with enormous interest rates applied all the while. But a report released yesterday offers what is perhaps the most clear evidence to date that payday lending mires borrowers in cycles of debt.
After examining records for the more than 80 percent of payday borrowers who take out multiple loans each year, the Center Responsible Lending, a consumer advocacy group, found that half took out new loans either immediately or, depending on the state, at the first opportunity the law allows. Within one week, 78 percent of multi-loan borrowers had returned for another round. Within 30 days, the figure jumped to 94 percent.
The fees associated with the repeat loans, CRL found, amount to $3.5 billion each year.
“Rather than serving as a bridge to get a borrower past a financial emergency to their next payday,” Leslie Parrish, senior CRL researcher and co-author of the report, said in a statement, “the data clearly shows payday loans work more like a shovel into deeper debt.”
The issue is on Congress’ radar, with at least two proposals to rein in the industry floating around Capitol Hill. One of those, as we pointed out a few months back, is a loophole-riddled bill that would effectively endorse payday lending as a legitimate business practice, while capping the annual interest rates for payday loans at the equivalent of 391 percent. The other aims to kill the industry altogether.
But whether Congress takes up either this year is still very much in question.
14 Comments
Pingback posted July 10, 2009 @ 11:32 am
[...] News Sources wrote an interesting post today onHere’s a quick excerptConsumer advocates for years have warned that the payday loan industry preys on low-income borrowers who become reliant on one loan to pay off another — with enormous interest rates applied all the while. But a report released yesterday offers what is perhaps the most clear evidence to date that payday lending mires borrowers in cycles of debt. After examining records for the more than 80 percent of payday borrowers who take out multiple loans each year, the Center Responsible Lending, a con [...]
Comment posted July 10, 2009 @ 3:14 pm
This allegation of PDL's creating a cycle of is not valid. Under CFSA's Best Practices, any customer who cannot payback their loan when due has the option of entering into an extended payment plan, allowing them to repay the loan over a period of additional weeks. This option is provided to customers for any reason and at no additional cost.
Pingback posted July 10, 2009 @ 4:35 pm
[...] the rest of this great post here Share and Enjoy: These icons link to social bookmarking sites where readers can share and [...]
Pingback posted July 10, 2009 @ 5:42 pm
[...] Random Feed wrote an interesting post today onHere’s a quick excerptConsumer advocates for years have warned that the payday loan industry preys on low-income borrowers who become reliant on one loan to pay off another — with enormous interest rates applied all the while. But a report released yesterday offers what is perhaps the most clear evidence to date that payday lending mires borrowers in cycles of debt. After examining records for the more than 80 percent of payday borrowers who take out multiple loans each year, the Center Responsible Lending, a con [...]
Pingback posted July 11, 2009 @ 6:41 am
[...] Report Reveals Cyclical Nature of Payday Loans – The Washington Independent.comConsumer advocates for years have warned that the payday loan industry preys on low-income borrowers who become reliant on one loan to pay off another — with enormous interest rates applied all the while. But a report released yesterday offers what [...]
Comment posted July 12, 2009 @ 4:13 pm
PAYDAY LOANS STINK! The political climate is changing and their end is near. Their store fronts are becoming more and more dangerous places to work. Their disgruntled clients are getting smarter, banding together and learning how to fight back. Payday Loan companies offered some valuable service to the community, but for too long, we've been playing by the unfair rules written by these powerful companies. PAYDAYLOANSSTINK.COM welcomes them to exist, but its time that the playing field is leveled. Payday Loan companies have proliferated through intimidation and misinformation for too long. PAYDAYLOANSSTINK.COM exists to give you – the consumer & the employee – the information you need to gain the upperhand. To escape their devious cycle-of-debt trap! PAYDAYLOANSSTINK.COM invites every one affected – including employees of the industry – to join in the discussion and learn from each other.
- JUST STOP PAYING! Always remember to put a Stop Payment on your check. It forces them to stop charging interest and negotiate a payment on your terms. Not theirs!
- Did you know that by sending them a simple Cease And Desist letter by certified mail, you can get all of their harassing phone calls – to you, your work and your family – to stop?
- And did you know that many Payday Loan store fronts are blatantly breaking laws every day? That a simple letter to your City Council or your Attorney General could help to shut them down? Or even get some of your money refunded?
- THE “EPP” EXTENDED PAYMENT PLAN – Available at nearly 70% of the nation’s Payday Loan stores, but yet you are never told about the EPP – “Right now your Payday Loan store is offering a three-month, interest-free payment plan for anyone who has a current loan! Save hundreds of dollars in interest. That’s right! Whether it’s Advance America, Check Into Cash, Quik Cash, Check N Go or some other Payday Cash Advance company, just tell them you are tired of paying interest and would like your FREE EPP. The Extended Payment Plan. Ask for it today before it’s gone!”
PAYDAYLOANSTINK.COM thanks you for taking the time to read this quick comment. Our new site has much more detailed information available regarding the topics above. As well as – “Small Claims”, “BBB & FTC Complaints”, “Arbitration Agreements”, Community Forums & more
Comment posted July 13, 2009 @ 3:46 pm
The typical fee charged by payday lenders is $15 per $100 borrowed, or a simple 15 percent for a two-week duration. When you hear inflated statements regarding a 390 percent annual percentage rate, you must remember that this would only ever happen if that two-week loan was rolled over 26 times, which never happens.
Comparing payday loans to other loans:
• $100 payday advance with a $15 fee = 391% APR
• $100 bounced check with $54 NSF/merchant fees = 1,409% APR
• $100 credit card balance with a $37 late fee = 965% APR
• $100 utility bill with $46 late/reconnect fees = 1,203% APR
For more information, check out: http://www.wddagroup.org
Pingback posted July 22, 2009 @ 11:29 am
[...] of the arguments: RTO Online The Washington Independent Progress Illinois Center for American [...]
Comment posted July 24, 2009 @ 6:02 pm
We've had to go to a few of these stores in the past and they were affordable. Not too long ago we actually used an online store cashloancity.com for $300 and it was everything we had hoped it would be when we were in need for extra money for vacation. The people that need a small loan know that this is the only resource available and you know what you have to pay back. It's not that big of a deal.
Comment posted December 1, 2009 @ 1:38 am
It's a fair assumption that anyone who's borrowing money against their next paycheck has financial issues that need more help than just a loan can provide.
Comment posted December 1, 2009 @ 6:38 am
It's a fair assumption that anyone who's borrowing money against their next paycheck has financial issues that need more help than just a loan can provide.
Comment posted June 10, 2010 @ 2:56 pm
The pay day loan industry really does prey on people who have a low-income. It’s so sad, because there is a reason for people having low incomes, and there are problems with the economy. I wish they would just lower their interest rates.
Comment posted July 24, 2010 @ 7:54 pm
Well of course there will be some cyclical nature to payday loans. In poor economies they naturally increase.
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