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Payday Loans Can Be Irresistible Trap
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A payday loan store near 39th and Main, one of many throughout the metropolitan area that are criticized for exploiting financially-strapped people.
Credit:  Michael McClure
ABOUT THE AUTHOR

Predatory lending is armed robbery and should be treated as such by all levels of government.

Payday lenders are not armed with firearms, it is true, but they have even more threatening weapons, a harsh economy and plenty of money to spend on carefully calculated marketing and persuasive advertising.

Once these greedy, unscrupulous sharks get their hooks into their victims, they make loans at 90 percent or much higher interest rates to desperate borrowers to pay back loans to pay back loans to pay back.

It’s all in the public interest, lobbyists and propagandists for the predatory lenders tell members of Congress,state legislators and city officials who continue to allow these crooks to conduct their business in plain sight. It’s worse than the Mafia ever was!

I’m not telling you something you didn’t know. I’ve written about it many times, and this daylight robbery has only gotten worse. Other journalists write about it too, including Eric Wesson, who wrote the lead story on the subject in this week’s Kansas City Call.

Wesson’s story is about a group of black ministers who are mobilizing to fight this organized crime in the Missouri General Assembly. Let’s get behind them! Start by reading The Call’s well-researched story.

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Comments 6 comments for this article
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Added: October 27, 2009. 09:26 AM CDT
Never say never
No one forces people to seek loans at these rates. If these people are charging rates that these people don’t know about (they’re hiding or not disclosing them), there are already laws on the books to allow prosecution. read more about payday loans
Anonymous
Added: October 14, 2009. 09:21 AM CDT
Huh?
Payday loans are accessed by 19 million Americans each year because they offer significant cost savings versus:
· The avg. $27-plus-interest fee on a bank overdraft (APR 704%)
· The avg. $29 fee on a late credit card payment (APR 757%)
· $51 in NSF and merchant fees on a $100 payment (APR 1329%)
· A $50 late/reconnect fee on a $100 utility bill (APR 1303%)

In addition to being more expensive, these options negatively impact credit ratings and may hurt a consumer’s access to employment, housing, insurance and other credit options.

The Federal Reserve Bank of New York in a January 2007 report found that payday loans are NOT predatory, and – by supplying credit where otherwise there would be none – they actually enhance the welfare of the households they serve.

Other studies have found:
· Households are better off with access to payday loans
· Bans on payday loans hurt consumers by increasing not only the cost of credit, but also instances of bounced check fees and personal bankruptcies
· Payday loan customers understand the fees associated with the product, appreciate having access to credit where otherwise there would be none, and use the product responsibly, as a short-term solution to unexpected and urgent expenses

So, payday loan borrowers are often making reasonable choices to proactively manage their finances in the face of more-onerous circumstances. They certainly don't need ivory-tower politicians, over-zealous editors or so-called "consumer advocates" limiting their financial choices.

Let's give consumers access to well-regulated credit options and let them choose which ones are best for them and their families.
Anonymous
Added: October 13, 2009. 08:34 AM CDT
Consumer demand for unsecured, short-term credit is undeniable. Millions of Americans are struggling to make ends meet, with nearly half living paycheck to paycheck. Rising unemployment rates have caused more families to transition from two-income to one-income households and hourly jobs and overtime payments are being scaled back significantly.
Eliminating payday loans as an option does not eliminate the need for short-term credit. Instead it forces consumers to choose between more expensive alternatives such as fees for bounced checks, overdraft protection, or late bill payments or even unregulated off-shore Internet lenders.
The term “predatory lending” is often used incorrectly to describe sub-prime financial services, including payday advances. The definition of “predatory lending” is unclear, but even when looking at the range of definitions available, payday loans do not meet the criteria of “predatory lending.”
PaydayLendingRep
Added: October 09, 2009. 09:53 AM CDT
What's the alternative?
What do you suggest consumers in need of an emergency loan do? Bounce a check? That costs more. So does overdraft. So does every other form of short-term credit. If you can offer small loans at better rates and find it more lucrative than scribbling your opinions, by all means, beat these payday lenders out of business.
Ryan458
Added: October 09, 2009. 09:42 AM CDT
What?
I don't know how to respond to someone who manages to write so much without using a single fact. What this guy knows about payday lending wouldn't fill a thimble.
GEB
Added: October 09, 2009. 09:22 AM CDT
You Are Full of It
Sir, you don't know what you are talking about. The APR of a loan becomes increasingly less relevant as the amount and term of the loan decrease. It does not tell you how much profit the lender is making nor whether the loan is beneficial for any particular consumer.

Many people do benefit from payday loans and customer satisfaction surveys show that a large majority of borrowers are satisfied with the service and consider it to be a valuable financial option. Yes, some people borrow more than they should and get themselves into a bind, but that is no more the lenders' fault than ice cream manufacturers are to blame for the obesity of people who eat too much ice cream.

Why don't you try doing something honest for a living, instead of trying to build your career by targetting innocent people?
Jon Schultz
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