Tuesday, December 5, 2006

As The Clarion-Ledger reported in September, check-cashing services offering exorbitant interest rates - or payday loans - have sprung up across the state.

Now, federal officials are taking an interest and the paper has written a new editorial about the practices.

Based on the fees of $17 per $100 loaned over a two-week period, yearly interest from instant payday loan operations would be between 400 and 500 percent. However, according to the Center for Responsible Lending, they can reach 1,000 percent.

According to Federal Deposit Insurance Corp. Chair Sheila Bair, there are about 22,000 U.S. payday cash advance outlets.

“It almost seems as if the market has become divided between two groups: those who successfully rely on banks for virtually cost-free basic financial services and those who pay high amounts,” says Bair.

The FDIC is expected to issue draft guidelines this week giving banks credit toward meeting federal community lending requirements if they offer reasonably priced, small loans. Many credit unions are already offering alternatives to payday loans no faxing.

But the state has a duty, too.

The Mississippi Center for Justice will ask lawmakers in the 2007 session to require storefront lenders to provide information about the amounts of money they lend and demographic information about their customers, and for legislation to authorize cities to regulate the number of fast cash loan lenders.

It’s a matter of consumer protection and should be done.

This entry was posted on Tuesday, December 5th, 2006 at 6:21 am and is filed under Mississippi.