Alabama Paper Urges Grassroots, Faith-Based Action Against Consumer Debt, Payday Loans
By Paul RizzoPayday Loan Writer
"The rich rule over the poor and the borrower is servant to the lender." Anyone who has ever been in debt has experienced the truth of that proverb, writes James L. Evans in the Decatur (Ala.) Daily. In Alabama and across the country, debt is something we know about.
According to the Federal Reserve, Americans are dealing with more than $2 trillion in personal debt, and that figure does not include home loans. Of this amount, more than $800 billion is credit card debt, with an average interest rate of 18.9 percent.
A survey conducted by Visa found that 48 percent of credit card owners only pay the minimum monthly payment. On a balance of $3,900 with a 18.9 APR, it would take 36 years to pay off the balance making only the minimum payment. The cardholder would pay $10,000 in interest to go debt free.
Therefore, it's hardly shocking that in 2005, more than 2 million Americans filed bankruptcy to seek debt relief.
It gets worse, too. The ugly side of debt that these numbers do not reveal come from the payday loan industry. Customers seeking payday loans in Alabama, for the most part, are unable to secure credit from banks, traditional loan firms or even their credit cards.
But as long as you have a regular job and a bank account, they will be able to get short term payday loans. A check is made out to the loan company for the amount of the loan, plus fees. The fee is normally 15-20 percent of the loan, meaning that on a cash advance of $150, the fee would be $22-30. The payday loan company deposits the check at the end of the pay period.
That's about a 450 percent rate per year.
With those return rates, it's no surprise that payday advance loans have become big business in Alabama. Leading the way is Advance America, the largest U.S. payday lender, which operates 10 (and counting) in Alabama.
In order to confront this growing problem, faith communities might need to step in. The use of credit cards is driven by both compulsive consumerism and poor cash management. Debt saps the strength of families and leaves them on the precipice of bankruptcy and poverty. Faith-based initiatives that offer money management counseling can help families trapped in these vicious cycles.
But the issue of how to deal with these payday loan companies themselves is a lot more complicated. Patrons, by design, have often already slipped under the radar of credit worthiness. Applying for faxless payday advance help is already the mark of last resort. The issues are not ignorance or compulsive spending, but having enough cash to meet basic needs. Families who turn to payday lenders.
It seems cruel to charge exorbitant fees to people struggling financially as it is. If Alabama wants to limit the impact of payday loans, it can make no distinction between the lenders who enact these policies, and those who stand aside silently and let it happen. Everyone must do their part in making sure consumers have, and utilize, better alternatives to these payday cash loans.
