How easy is it for a person who bought a house with cash to get a credit card? Not easy at all, according to the Chicago Sun-Times.

Arjan Schutte, whose immigrant father paid bills on time for decades, only decided to get a credit card so he could order plane tickets online.

"He was denied by everybody," said Schutte, Associate Director of the Center for Financial Services Innovation in Chicago, speaking before a panel on alternative credit scoring.

Lenders are starting to realize that potential borrowers often experience trouble getting loans because they lack traditional credit information.

While normally lauded as admirable habits, making purchases with cash and avoiding consumer debt don't build a conventional credit history, which means consumers might have to overpay for home loans and other important purchases. With that in mind, companies are exploring other gauges — even going so far as to include payday loan payments — when evaluating consumer credit.

The chart at left shows just how greatly one's credit score can affect the interest rate granted by a lender — and why it is cause for such concern.

One way to allow consumers to build credit is to count regular, on-time payments like rent, phone and utilities towards a credit score, said Michael Nathans, founder and chairman of PRBC, a Washington-based credit bureau that provides alternative scoring.

"Payments for rent and gas are indicators of one's ability and willingness to make recurring payments on time, but they are not reported to the traditional credit bureaus," said Nathans, who said PRBC is close to signing an agreement with a top U.S. automaker that wants to use PRBC data.

PRBC already has in place a "memorandum of understanding" with the National Association of Mortgage Brokers to help educate association members on how to offer PRBC service to prospective customers.

Experian, one of the nation's three traditional credit bureaus, is looking into the use of alternative credit scoring data as well. The company is considering looking at payments on payday loans, rent and utilities as a way of building credit history, in addition to traditional measurements.

Across the nation, those facing student loan debt are thinking about payday loans. This is especially true for recent graduates in Utah.
Recent reports show that student debt is at an all-time high in that state - and students are in for another hit on July 1 when interest rates go up. The rates on existing loans will rise 1.84 percentage jumps and rates on new loans will go up from the current 5.3 percent to 6.8 percent.

Education leaders worry that the increasing tuition and growing debt are pricing some students out of higher education and causing others to bypass lower-income careers, such as teaching and social work, for higher-paying jobs so they more readily can pay off their loans. Moreover, the payday loan issue can't help but be raised.

"You have to go on to get a graduate degree to be marketable, but I didn't feel comfortable with the debt I already had to get further into debt,'' said Brigham Young graduate Max Hunsaker, 24, who owes $15,000. "I want to have it paid off. It's kind of the motivation for all the decisions I'm making right now.''

In Utah, the average debt on a bachelor's degree is about $14,790, a 45 percent increase since 1995.

"There's some growing trends that because of the costs, people have to look at what is the major that's going to help me pay this back, which is not especially good for society,'' said David Feitz, associate executive director of the Utah Higher Education Assistance Authority. "If somebody has $80,000 in debt and they have an MBA degree, we don't worry too much about them. But if they're going into elementary education, those borrowers are the ones we have concerns about."

What is one of those individuals to do? Some consider online payday loans. Others take on more than one job. Others ask parents for help.

Feitz attributes the overall debt increase to tuition hikes. Total tuition and fees at the University of Utah have shot up more than 60 percent in the past 10 years. At the same time, the amount of aid money offered through federal grants has remained stagnant.

It's a dangerous combination. Ideally, no one would need a cheap payday loan in order to afford an education. These days, however, money is tight.

The issue of military payday loans is growing around the country. The FTC may even step in. Out west, however, the L.A. Times reports on an unusual lobbying effort.

Military brass plan to visit Sacramento next week to plead with legislators to significantly amend a bill they fear could worsen the problem of "predator lenders" targeting military personnel with no fax payday loans.

Navy and Marine Corps officials say that bill AB1965 would actually make their troops even more vulnerable to high-interest, no-questions-asked payday loans from payday loan stores clustered outside military bases.

Such stores "represent a real threat to our military readiness" by saddling sailors and Marines with enormous debt, said Rear Adm. L.R. Hering, commander of the Navy Region Southwest.

INSIDE THE PAYDAY LOAN BILL

The bill, introduced by Assemblyman Ted Lieu (D-Torrance), is tailored to help "citizen-soldiers" who are mobilized by National Guard units while they still owe money from payday loans. But it does nothing for active-duty personnel and, worse, it could inhibit future legislative action by giving the impression that the military's concerns have been addressed, officials said.

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In a recent survey, a Dublin, Ireland research institution, Research and Markets, found that U.S. consumers were the most likely to have "no spare cash." This would suggest that Americans, more than any other nationality, are likely to need a payday loan when encountering an unexpected expense.

In fact, Americans in the same survey were asked how they spend the spare cash they do have, 37 percent said they use it to pay off credit card debt and/or other loans. While it is unclear how much this lack of cash is due to spending or paying off previous loans, the fact remains that Americans are the most likely to need to borrow for future needs.

While it appears that the market for short term payday loans continues to increase, they are not consumers' only option. The interest rates on the credit cards may or may not be better than those on unsecured loans, but they may have rewards programs or other benefits.

Similarly, home equity loans have lower interest rates than unsecured loans. Bankrate.com cited a 7.99 percent APR, on average, for a $30,000 loan in September 2005, while the Federal Reserve cites over 12 percent for a 24-month personal loan.

In a 2001 survey of payday loan customers, 66 percent used the small, online cash loans (which are usually limited to $500) because of unexpected expenses and/or temporary reduction in income.

The report clearly identifies the principal factors driving or curtailing growth in unsecured loans. Exclusive research reveals consumer attitudes and behavior toward loans, broken down by demographics. Six years of sales data provide a factual and impartial presentation of the market, which continues to make the news with great regularity.

As student loan debt rises, it's good to know one payday loan company is doing something about it. LeadPoint Inc. recently announced the addition of three new categories to its growing roster of leads traded on its exchange.

The Student Loan Consolidation, Payday Loan and Consumer Credit Service verticals will enable both buyers and sellers to trade leads in real time on the LeadPoint platform.

LeadPoint’s Student Loan Consolidation category launches at an opportune time for lead buyers and sellers, given the amount of anticipated activity due to variable loan interest rates potentially rising as much as 40% on July 1st. There is also new legislation planned that will prevent current students from consolidating loans, meaning these instant payday loans could be the answer.

Payday loan leads is a large and growing category that funds over $40 billion in payday loans per year. The new LeadPoint platform enables payday advance lending companies and lead sellers to exchange leads for consumers who are interested in receiving cash advances using their paycheck as collateral.

The Center on Business and Poverty at the University of Wisconsin-Madison received a two-year, $35,000 grant from the Helen Bader Foundation.

The UW organization researches and disseminates information that helps companies assist their low-income employees. The grant from the foundation will fund a program to teach better financial management to low-income, Milwaukee-area residents.

The Center on Business and Poverty is an initiative of the Institute for Research on Poverty. It arranges for qualified volunteers to work through companies to assist employees in filling out tax forms. Employees learn more about other financial resources as well, such as ways to deposit paychecks directly, avoiding overdraft fees, or ever having to rely on last-ditch options like fast payday loans.

"For low-income people, tax time the biggest financial day of the year. Refunds and credits often are picked up during tax season. If employees get good advice from the volunteers we bring in to do taxes at work, it can make all of the difference for low-income families," said John Hoffmire, Director of the Center on Business and Poverty.

Federal Reserve Chairman Ben Bernanke recently stated that while most Americans manage money reasonably well, low-income families have the greatest difficulty.

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Because they are, by nature, locations where people can access quick cash, it's no surprise that payday loan stores are easy targets for criminals. A look at today's industry news reveals two armed robberies involving payday loans, one of which has thankfully been solved.

In Virginia, two Bentonville, Ark., residents were arrested in connection with a robbery at a Payday Now Cash Advance store.

On Friday, the Bentonville Police Department received a call regarding an aggravated robbery at the payday loan company, and a subsequent investigation showed that a male subject entered the store, pointed a gun at the clerk and demanded cash.

The suspect’s accomplice, a female, was given an undetermined sum. The two fled the scene and the region, turning up in Virginia days later. Timothy Donnell Satchell, 27, and Marciela Barrientos Gomez, 27, were taken into custody by the Virginia State Police and are being held pending extradition to Arkansas.

In Cananda, a similar incident took place and the perpetrator is still on the lam. Police in Winnipeg, Manitoba are on the lookout for a man who robbed a Transcona payday loan outlet at knifepoint June 13.

The Winnipeg Sun reports that a pony-tailed suspect armed with a knife walked into the store, located on Regent Avenue, and abruptly demanding money. No one at the fast cash advance store was hurt.

Police are actively pursuing the man, who is described being in his early 30’s, and about 5' 10" with a stocky, 180-to 190-pound build, a pony tail and an unshaven face.

Corporate environments, sprawling apartments, financial freedom - such are the dreams of many college students as soon as that final exam is passed in. They hope to ditch their graduation gowns for a life on their own.

Unfortunately, rising student loan payments make this difficult. Recent studies show that the price of education is higher than ever - could the use of a payday loan be the answer?

For the 2005-06 school year, the average cost of attending a four-year public school was $5,491, according to the College Board. Meanwhile, full-time enrollment in a four-year private university set students cost $21,235. Consequently, the U.S. Department of Education's National Center for Education Statistics reported that an estimated 65 percent of the students who graduated in the 2003-04 school year had student loans.

That's A LOT. The result? Graduates are soon saddled with debt before even receiving their first paycheck. For this reason, many turn to online payday loans.

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As consumers are being educated about payday loans in general, the Federal Trade Commission (FTC) may soon be focusing its efforts specifically on military payday loans.

While the FTC does not resolve individual consumer problems, your complaint helps us investigate fraud, and can lead to law enforcement action,” said the agency’s website, Military Sentinel, at www.consumer.gov/military.

The FTC launched Military Sentinel in September 2002 in response to the burgeoning problem of unscrupulous lenders taking advantage of enlisted men and women with military payday loans. Fraud and errant business practices can be reported on the site.

“FTC is not structured to take action for an individual case,” said the agency’s public affairs office spokeswoman, Jackie Dizdul, who handles military fraud complaints. “FTC takes companies to court to stop deceptive practices.”

The key to cracking down on such businesses is to alert the FTC by filing a complaint. Currently, the service cautions enlisted men and women against getting involved with short-term, high-interest cash loans in a story titled “Stay Away From Payday Lenders,” replete with information from Dara Duguay, Citigroup’s director of the Office of Financial Education.

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A new type of small loan in Louisiana that would use autos as collateral and charge interest rates of 25 percent per month has drawn heavyweight lobbyists and consumer advocates groups into a heated legislative debate.

The Times-Picayune reports that a group promoting conservative social values (which rarely takes positions on financial legislation), has come aboard the campaign against the proposal. The Louisiana Family Forum is steadfastly opposed to the measure.

Sponsored by Sen. Edwin Murray, a New Orleans Democrat, Senate Bill 743 would create a Louisiana Motor Vehicle Title Loan Act as a way for people with bad credit to obtain short-term cash — at risk of losing their car if they don't pay it back quickly. This is similar to how payday loan firms operate in that those with poor credit and little collateral can qualify.

"The interest rate is high, there's no doubt about it. But without this bill there's really no place for them to go," Murray said.

But consumer advocacy organizations aren't buying it.

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