Payday Loan Times

It's been an opportunity available to Americans for years, but online payday loans have just now made their way overseas. 

The UK’s first online payday loan is available from Payday Loans UK, making it easier and more convenient than ever before to receive a cash advance loan until your next payday. By applying for a payday loan online, you can actually receive cash the same day in some cases.

Unlike many other instant payday loan lenders, Payday Loans UK only requires that you're a UK resident at least 18 years of age and receive your pay by direct deposit. Moreover, unlike other cash advance lenders, a debit card is not required and credit checks are not used, making it even easier to be approved.

With regular paychecks, little financial experience, and the responsibility of having to deploy at a moment’s notice around the world, members of the military are perfect prey for predatory lending institutions offering high-interest payday loans.

“Lenders know they’re going to get a paycheck out of someone in the military. Plus, service members travel a lot and are away from their support networks. Overseas, they might not know their options,” Kelley Finch, the Navy-Marine Corps Relief Society’s outgoing director at Yokosuka Naval Base, said.

Although agencies offering faxless payday loans aren’t springing up around military bases in Japan and South Korea like they are in the lower 48, U.S. service members needing quick cash or lower monthly credit debt payments still get caught in the downward spiral of debt. In Japan, armed forces members simply find them online.

The Navy-Marine Corps Relief Society (NMCRS) is tracking the problem in Yokosuka and have seen about 10 cases in the region this year.

“It seems to keep increasing,” said Chuky Spivey, the group’s incoming director.

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Welcome to Queensland, Australia: A loan shark's paradise.

That's what columnist Patrick Lion of the Courier-Mail calls the Australian province, where one can pay $16,000 in fees over the course of a year for $1,000 payday loans.

The most astonishing fact about this example is not the crippling way the monthly interest rate compounds to a 1,600 percent annual rate.

It is that the State Government, through the Office of Fair Trading, has done nothing to stop thousands of Queenslanders from being ripped off by these rates since the fast payday loan industry exploded in 1998.

According to Lion's op-ed piece, the Courier-Mail contacted Fair Trading Minister Margaret Keech's office last month for a story on the industry. She said she was in the process of reviewing whether to introduce a cap similar to New South Wales and Victoria, where rates are limited to about 48 percent.

Incredibly, Queensland has no cap and the highest known rate offered is 1,600 percent. Yet the promise of a review is likely to be just another example of the considering, investigating and stalling that the Fair Trading office has become known for over an eight-year span in which Queensland has become a hotbed for faxless payday loans.

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A recent article in The Daily World deals with these inquiries.

As gas prices soar and families look to take expensive vacations, we're entering a time of year where people often find finances especially tight. Consequently, the use of faxless payday loans is often considered. They seem so easy!

Through the internet, telephone, mail and television, we get bombarded with offers of “fast cash regardless of credit.” These pitches are usually from lenders whose tactics could be considered “predatory.”

To help you avoid these traps, the publication asked its housing counselors, Royce Travis and Julie Galligan, to answer some questions on predatory payday advance lending.

Q: I’m often out of money before the end of the month, so I go to one of those check-cashing places. Now I go there at least once a month, but it seems like I just keep getting further behind. Help!

A: Using “payday loan” or “check cashing” companies can lead to dependency. After paying back the initial loan, you find yourself broke and so you take out another loan to feed the family and pay bills.

Though the "quick cash” seems harmless (pay $56 for borrowing $200) the following information might make you think: Calculated on an annual basis, the interest rate you paid on the $56 fee is 730 percent!

If you find yourself frequently needing cash between paydays, it’s time to establish a budget to help maximize the use of your funds so payday loans are not necessary.

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The Courier-Mail reports that Queensland, Austrailia residents are still being walloped with annual interest rates of 1,300 percent on short-term or pay day loans while the country's southern states are protected with caps of about 48 percent.

The State Government has been accused of dragging its feet on its plans to slash and cap the interest rates, but says more time is needed to achieve the most satisfactory outcome for consumers and lenders.

Consumer groups believe Queensland's relaxed laws compared to other states have contributed to the rapid growth of the short-term loan industry.

Local lenders contacted by The Courier-Mail were offering interest rates of 30 percent or 40 percent a month, compounding into hundreds of percent over a full year. Fair Trading Minister Margaret Keech would not agree to an interview or comment on a possible cap level, but said the needs of both lenders and consumers will be considered.

Queensland payday loan firms have been forced to detail all charges and fees in writing for five years after the Office of Fair Trading brought them under the Uniform Consumer Credit Code. The measures were intended to close a loophole that exempted full disclosure on loans of less than 62 days, but instead drew strong criticism for not capping rates.

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As low fee payday loans take hold in Great Britain, at least one consumer group is trying to stop the spread of corrupt lenders. Yes, the Scottish Illegal Money Unit is on the case across Glasgow, currently probing 94 cases of questionable loan practices.

The seven-member team's achievements were recently  trumpeted at the Trading Standards Institute's (TSI) conference in London. The payday loan team has used the law to seize 500,000 pounds worth  of illegal lenders' assets.

Ron Gainsford, chief executive of TSI, said: "The units have had remarkable success - not only catching some of these sharks but also warning people not to fall into their trap."

Not shockingly, these investingations have found that illegal money lenders and payday advance lenders target vulnerable people, such as single mothers, drug addicts and those with mental health problems. The worst use threats or violence to force their victims to pay up at extortionate rates.

Malcolm Hurlston, chairman of debt charity the Consumer Credit Counselling Service, said:

"Loan sharks are the scourge of society … We would like to see financially respectable creditors making products available for the less well-off … They put plenty of effort into the wealthy - let's see them work on the poor."

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.

Another week, another press released from My Payday Loan. Let's hear what the cash advance company has to say now:

With the increasing number of applications for payday loans coming in, a new customer call centre and response department has been hired to beef up the team and continue the high levels of customer service for which My Payday Loan is known.

Over the past week, four new staff have been trained in the company’s core payday loan lending business, focusing on quick customer response and dealing purely with customer enquiries. The new call centre team is going to be managed directly by Chief Operating Officer, Kirsty Auchincloss who explains:

“Customer service has always been at the fore here at My Payday Loan. Customers needing cash advances until their next payday are not only looking for speed and ease of use but also to know that they are dealing with a reputable company online.

My Payday Loan’s reputation for customer service was highlighted by a recent survey which returned a number of compliments for the team and the benefits of online payday loans. More customer surveys are planned to monitor the success of the new team.

As the My Payday Loan team continues to grow and customers remain happy with the service, it emphasizes that a no fax payday loan is still the best alternative to risking high and confusing bank charges when a little extra cash comes in handy

Aliens. Chihuahuas. Office ladies who turn into leotard-sheathed dancers coming to the rescue. All of these unusual entities have been the focus of payday loan commercials in Japan - and the ad campaigns have been working!

 
According to the Japan Consumer Finance Association, this market has continued to expand - the combined amount of outstanding payday loans at consumer lenders exceeded 11.7 trillion yen in March 2004, 2.5 times the amount reported 10 years before.

"There has always been a strong demand for such loans" that require no collateral or guarantor," said Tomoaki Sakano, a professor at Waseda University's faculty of commerce.

Back in the 1960s, the faxless cash advance loan business was an untapped niche market in Japan, where banks were mainly focused on companies and unsecured payday loans were too risky to match the interest rates they offered. Despite occasionally drawing heat for aggressive collection tactics and the growing number of people ladened with multiple debts, this is where consumer finance companies have come to play a key role, according to Sakano.

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The technological world is about to pay off for those interested in online auctions. Now that MEM Consumer Finance Ltd. has joined forces with “Search and Auction” Site, www.huntforit.co.uk, payday loans will be easily acquired by those in immediate need of them.

Payday UK has created a new “ability to spend” system for users of the new Hunt For It site. This system allows people bidding on theauction items available through to apply directly for an instant cash loan without leaving the bid site. It's invaluable if you need that extra money to secure the item of your dreams.

Nick Auchincloss, Head of Corporate Development for MEM said:

“Both MEM with our payday loan products and “Hunt For It” with their revolutionary search and bid system are growing businesses with a great technological set up. By working together, we can open avenues to the consumer that previously would have been non-existent.

The technology behind this payday loan online approval system means that customers are normally approved and have their funds deposited on the same day of application. This gives them peace of mind that they can make that additional purchases without it impacting their existing financial arrangements.

Thanks to the short duration of such a faxless payday loan, individuals can just pay it back on their next pay day; they won't keep paying for their item three years later like a credit card.