Decatur Attorney General Speaks About Payday Loans
By Paul RizzoPayday Loan Writer
Each time 57-year-old Ruby Price had to take out a payday loan, it cost her dearly.
When she borrowed $400 from Advance America, the finance charge on five monthly payments, with no late fees, was $810. When she borrowed $750 from Check ‘n Go, she paid the loan off early, but the price tag still amounted to $1,191.
Then there was the cost to her self-esteem - both at the thought of how much she was paying and about how her credit union, CEFCU, had denied her a personal loan each time even though she’d paid back two auto loans without incident.
“When I was accepting these loans, I was thankful I could get them because the need was immediate, and I had no money of my own,” she said. “But I knew I was being taken advantage of.”
Price, who is supporting six dependents from the salary she earns as a nurse at a Bloomington nursing home, was among the speakers at an anti-payday lending rally attended by more than 100 people Saturday at St. Peter’s African Methodist Episcopal Church.
Illinois Attorney General Lisa Madigan, the keynote speaker, urged the state House to pass legislation already approved by the Senate that would make the Payday Loan Reform Act of 2005 applicable to all no fax payday loans that exceed an annual finance charge of 36 percent instead of only those with a term no longer than 120 days.
“Payday lenders depend on the borrower’s inability to pay off the loan at the end of its term, forcing the borrower to take out a new loan to pay off the old one, generating additional fees,” Madigan said. “They disproportionately market their lousy loans to women, minorities and members of the military.”
She also called upon financial institutions to offer alternative faxless payday advance loan products that can sustain families temporarily without “shackling them to a treadmill of debt.”
Cheryl Merkel, president of the Central Illinois Credit Union in Champaign, and Jeannette Sheets, manager of the CEFCU Decatur member center, then went to the podium to outline the alternatives they offer.
Central Illinois Credit Union has earned more than $8,200 in profits by offering to its members payday alternative loans at 21 percent interest since July 2005, Merkel said.
Only $300 can be borrowed initially, and repayment must be made within six months. Cash advance loan borrowers also are given the option of opening a rainy day account and receiving a $30 bonus for saving at least $10 per month for three months through automatic payments from their checking accounts.
“We do not have to wait for the larger institutions to act,” Merkel said. “We have a great product that’s working very well.”
Sheets apologized to Price for not having CEFCU’s pilot Quick Advance loan to offer her when she needed money.
She said the interest rate is capped at 18 percent, and the supposesdly cheap payday loan must be paid in full within 31 days - costing the borrower just $7.05 for the maximum loan amount of $500.
When the Rev. Robert Bushey, pastor of children, youth and families for Central Christian Church, called on Merkel and Sheets to make their products permanent and to encourage other financial institutions to follow their lead, both agreed.
Central Christian and St. Peter’s AME are members of the Central Illinois Organizing Project, which sponsored Saturday’s rally, as are First Presbyterian Church and the Decatur branch of the National Association for the Advancement of Colored People.
