Payday lending
Need quick cash? If you’re thinking about writing your check payable to payday loan, think twice before signing it. Although it may seem like a simple and easy way to get fast cash, it’ll only put you in endless cycle of debt.
What is a payday loan? Payday loan, also known as cash advance loan or check advance loan, is a short-term loan where an individual writes a post-dated personal check in a small amount one wishes to borrow plus a borrowing fee. The payday lender will cash the check if the borrow is unable to repay the loan, typically on borrower’s next payday.
The process is very simple and quick where one receives cash immediately. Also, the borrowing fee may seem reasonable, but that isn’t case. For example, if you borrow $255 from a lender and include $45 in borrowing fee for a 14 day payday loan, the Annual Percentage Rate (APR) for this loan is 460 percent.
Here’s the calculation:
| ((45/255)x 365)/14)= |
| (0.17647 x 365)/14)= |
| 64.41156/14 = |
| 4.6008 or 460.08 percent |
Unless you pay the loan within two weeks, you risk carrying over the loan for several terms which leads to endless cycle of debt. For an educated decision, look for the lowest APR in loan options – some banks may offer short term loans or check cash advance on a credit card.
THE LAW
The Consumer Federation of America (CFA) provides legal status of payday loans by state. The online resource provides legal status, citation, rate cap and information about where to complain or get information. The CFA website is at http://www.paydayloaninfo.org/state-information. As for legal status in D.C., the payday loan is prohibited. On October 3, 2007, the “Payday Loan Consumer Protection Amendment Act of 2007” was signed into law which prohibits payday lending.
YOUR RIGHT
If you utilized payday loan and have difficulty making payment and wonder what your choices are, communicate with your lender to arrange an extended payment or contact your local consumer credit counseling service to develop a budget in helping you get out of debt. The United States Department of Justice has a list of approved credit counseling agencies and debtor education providers at http://www.justice.gov/ust/list-credit-counseling-agencies-approved-pursuant-11-usc-111.
FILE A COMPLAINT
If payday lender refuses to work with you and ends up harassing you because you’re unable to make payment, you can file a complaint with your state attorney general. Also, you can submit a complaint with the Consumer Financial Protection Bureau (CFPB) online or by calling 1-855-411-2372.
Here is the website to locate your state attorney general http://www.naag.org/naag/attorneys-general/whos-my-ag.php. To submit an online complain with the CFPB, here is the website http://www.consumerfinance.gov/complaint/#payday-loan.
RESOURCES:
http://www.bankrate.com/finance/personal-finance/ways-to-save-during-holidays-1.aspx
http://www.consumerfinance.gov/complaint/#payday-loan
http://www.consumer.ftc.gov/articles/0097-payday-loans
http://www.paydayloaninfo.org/state-information/16
Predatory Lending News Articles
Predatory lenders target vulnerable consumers online
The Atlantic
Google prohibits advertisements that offer short-term loans without communicating the full terms of such loans. Payday lenders are currently able to circumvent these policies, however, by purchasing information from lead generators, or companies that use individuals’ search information to generate and collect personal information about online consumers. The predatory practice was the subject of an October 2015 Federal Trade Commission workshop.
Federal regulators propose new regulations on high-interest, short-term loans
McClatchy DC
The Consumer Financial Protection Bureau, a federal agency with authority over payday loans, in March 2015 outlined new roles that would restrict payday loans. The rules would task lenders with either “preventing” or “protecting” against debt traps by verifying a borrower’s income and limiting how many small loans could be issued in succession.