Payday Loan Times

Despite interest rates that can range close to 400 percent, thousands of Washington state residents are flocking to instant payday loan outlets for quick cash.

According The Bellingham Herald, The Washington Department of Financial Institutions recently released a payday lending report showing that payday loan outlets in the state made nearly $1.4 billion in small loans in 2005.

As recently as 2000, the dollar volume of those loans was $580 million. The number of individual loans shows similar growth - from 1.8 million loans in 2000 to almost 3.6 million last year.

Dennis Bassford, president of Renton-based MoneyTree Inc., says his company and others like it provide working people with a convenient shortterm solution to financial difficulties. But critics of the payday advance industry see it as a trap for the unwary.

For Bellingham resident Rhonda Bremner, it was both.

Bremner is a single mom with two teenagers, and two years ago she was having trouble stretching her $10-an-hour paycheck to the end of each month.

With Christmas approaching, she decided to go to the Bellingham MoneyTree outlet because she had seen the company’s advertisements on television. Whatcom County has more than 20 registered no fax cash loan operations.

She borrowed a couple hundred bucks using a check postdated for two weeks out, her next payday. It seemed a lot easier than hitting up relatives or friends for money.

But when payday rolled around, Bremner was still short of cash.

“The next time, you get a larger loan to cover the last loan, and it just takes off from there,” Bremner said. “You really don’t pay attention to how much the interest rate is. All you’re thinking of is getting fast money so your power doesn’t get shut off and things like that.”

The cycle went on for nearly two years. Bremner eventually was getting payday loans from four different companies, her loans totaled $1,600, and her interest payments added up to more than $400 a month. She went to her church, Christ the King, for help, and was referred to Darlene Moore, a volunteer with Love INC., which stands for “Love In the Name of Christ.”

Moore helped Bremner untangle her finances, showing her how to take advantage of a provision in state law that requires payday lenders to offer extended payment plans to borrowers. Bremner is now paying down her debt on a sixmonth repayment schedule.

Moore, a retired bookkeeper, said she’s done similar work for about a half-dozen people like Bremner, and all of them were driven to the wall by their payday cash loans.

“They have seen this as fast, easy cash without a credit check, and suffered the consequences afterwards,” Moore said.

Moore believes cash advance payday loan companies should be required to run credit checks to make sure their borrowers have the capacity to pay back their loans. Otherwise, payday borrowers get trapped into getting more and bigger loans for larger amounts.

As Moore sees it, the payday loan industry is based on loaning money to people who could not qualify for any other kind of loan.

“Why would you go there if you could borrow money more cheaply somewhere else?” she asked.

Bremner doesn’t blame the payday loan industry for what happened to her. She still believes a no credit check payday loan could be a reasonable choice for people who are confident they will be able to repay the amount quickly, without going deeper and deeper as she did.

But she also believes borrowers may have better options, such as calling other creditors to arrange affordable repayment terms.