Letter to North Carolina Newspaper Pushes for Fair Payday Loan Practices
By J.J. CameronPayday Loan Writer
Paul L. Burnley retired after 23 years of newspaper work in Chicago and St. Louis. He now lives in Fayetteville and recently wrote the following, paraphrased letter to The Fayetteville Observer …
I remember times while growing up in St. Louis and Chicago when some people didn’t have enough money to last from paycheck to paycheck.
Some turned to the neighborhood pawnshops to help get them through. These were the older equilvalent of today's cash advance stores.
There were men who would pawn their Sunday suits for $10, just enough to last them until payday on Friday. On Saturday, they returned to redeem their suit by paying the $10 plus a $1.50 charge.
Most looked upon this as a service to the community. No one felt the pawnbroker was making a large profit from these transactions and welcomed the help.
In the ’60s and ’70s, many companies saw this practice as a way to exploit low-income people or those who were unable to obtain loans from banks. Sound familiar? Sound like critiques levied against providers of regular or online payday loans?
They understood that the $1.50 interest on a $10 loan for a week or two could amount to a large rate of interest, compounded over a year. If the loans were larger, and extended over a longer period, the interest would grow as well. In some cases, the annual interest rate on some of these short-term loans could run as high as 400 percent.
Today, this practice has grown into a $3.4 billion-a-year industry. The average borrower is paying $800 for a $325 payday cash advance. These companies are so widespread that in California there are more payday loan outlets than McDonald’s and Burger King restaurants combined.
Many older Americans have been caught in this trap. Their utility bills may be high; they may be forced to use a short-term loan to help them get by. But when their check arrives, they find themselves in a situation where they’re still behind, which forces them to renew the short-term loan.
They find themselves in a hole they can’t climb out of.
Resolving the payday loan problem: Many states, including North Carolina, have taken steps to outlaw quick payday loan companies. Some just move to states that allow them to continue operating.
I’m sure some of our legislators in Raleigh and Washington feel they were not elected to baby-sit and watch over every action taken by their constituents. But, by the same token, they are not obligated to support legislation that allows these types of businesses.
This is a major problem facing a large number of low-income people. Most agree there should be payday cash loan lending companies to aid people who find themselves in a position of need. But our lawmakers shouldn’t look the other way when the people who put them in office are being financially drained by these modern day loan sharks.
