Pay Day Lenders Rip off the Poor
Pay Day Lenders Rip off the Poor
Go into any low income area and what do you see? A Pawn shop, a check cashing business, and a payday lender. All of these companies take advantage of poorer folks by offering services at astronomical rates. Pawn shops average percentage rates add up to around 345% per year. Check cashing places cost you 10% of the total plus a fee. Pay day lenders will let you write a check for a 10% fee within 7 days. These companies are strategically placed in these communities to take advantage of individuals difficult circumstances.
Many in America are asking why there is such a split between the poor and the rich.? Many blame president Bush for all of America's problems. This writer suggests that you look to these type of business. America has lost its way in this regard. In the past, one could borrow money on ones reputation not credit score. A persons name was important. Today, muti-nationals own most of the lenders today. Pay day lenders don't want to be regulated and are advising legislatures in South Carolina to keep hands off as Pay Day lenders are less costly than bounced checks or utility companys disconnection and reconnection charges. The wieght of these fees are on the backs of the poor and needy. I am a capitalist almost all definitions of the word. I am also a Christian who has read in biblical times that the Jews would not harvest the outer portions of their fields because this was left to the poor. Today, pick some corn from a field and you will get shot. We certinally have lost our way as we deal with the poor.
MULLINS — Kathryn Gales was a 56-year-old widow when she made a series of decisions that left her without a car and hundreds of dollars in debt to payday lenders.
“I was stupid,” Gales says, sitting in the living room of her one-bedroom apartment. “I did it on my own, but it was a bad mistake. It just turned into a mess.”
Gales’ debts were eliminated after her pastor intervened and a lawyer sued the lenders.
But critics of payday lenders say that outcome is rare for the thousands of South Carolinians who take out payday loans each year. Those critics want tougher state restrictions on the sky-high- interest-rate lenders — or an outright ban.
Payday lenders say most of their borrowers are responsible and don’t get caught in a spiral of debt.
Government should not step in to limit consumers’ choices, they add. They say their service allows people to get small amounts of money at a cost that is less than a chain of bounced checks or utility cutoff fees.
This week, nearly 10 years after it legalized payday lenders, the S.C. General Assembly is on the verge of deciding whether to restrict them.
Every year, payday lenders strip $4.2 billion in excessive fees from Americans who think they're getting a two-week loan and end up trapped in debt. This report finds that across the nation payday borrowers are paying more in interest, at annual rates of 400 percent, than the amount of the loan they originally borrowed.
Despite attempts to reform payday lending, now an industry exceeding $28 billion a year, lenders still collect 90 percent of their revenue from borrowers who cannot pay off their loans when due, rather than from one-time users dealing with short-term financial emergencies.
Based on data collected by state regulators, financial records released by payday lenders, and assessments by third-party analysts, we update our 2003 quantification of the cost of predatory payday lending to American families. Breaking down the impact by state, we also calculate the savings to families in states that have banned payday lending.
In this report, we find that:
- Ninety percent (90%) of payday lending revenues are based on fees stripped from trapped borrowers, virtually unchanged from our 2003 findings. The typical payday borrower pays back $793 for a $325 loan.
- Predatory payday lending now costs American families $4.2 billion per year in excessive fees.
- States that ban payday lending save their citizens an estimated $1.4 billion in predatory payday lending fees every year.