Payday Loan Times

Predatory lending has become a nationwide concern. So begins a straightforward article in The Sulphur Daily News.

With the holidays behind us and the credit card bills on their way, consumers should be aware of what predatory lenders look for in their target victims. But before one can recognize predatory quick cash advance lenders and their tactics, you must first understand the nature of the beast.

Predatory lending is the practice of convincing borrowers to agree to unfair and burdensome loan terms. The most common predatory lending abuses occur in pay day loans, credit cards, and overdraft loans.

Predatory lenders often are accused of being discriminatory because they target the poor, the elderly, college students, and most recently military families.

Their marketing tactics include aggressive solicitation, home improvement scams and other too-good-to-be-true offers, which all end up costing the borrower exhorbitant amounts of money in the form of high annual interest rates and excessive fees.

Consumers who have overextended themselves during the holiday season may begin to feel the pinch in January and be looking for financial relief by accepting a tempting credit card offer or no fax payday loan.

The most common type of predatory lending in our area is payday loans.

If your look around town, you will see the numerous payday loan establishments that have cropped up in the last couple of years. These storefront businesses prey on the poor and the uninformed.
It’s not hard to see how easily the payday advance loan can dig a bigger hole of debt rather than help the borrower out of a short term crisis.

The Center for Responsible Lending says payday borrowers on average receive 8 to 13 payday loans a year. Moreover, 90 percent of payday lenders‘ revenue growth comes from making more or larger loans to the same customer.

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Recently, an elderly woman in Acadiana, La., placed a call to her local Better Business Bureau office. Why?

Because she didn't understand why the money contained in her Social Security check was being deposited directly into the bank account of a local payday loan company.

Meanwhile, another older couple living in Crowley, La., came into the same office after realizing they put their house up as collateral in return for a payday loan they subsequently fell behind on.

“The vast majority of people do not ask the right questions. A lot of people don’t even understand the contract, but there is not much we can do about that. We feel powerless. I have heard some horribly sad stories, and I think in a lot of cases, the companies do prey on the low income, low educated and the desperate," said Sharane Gott, president of the Better Business Bureau of Acadiana. "They know they don’t have the capability to read the contract fully. That’s the calls we get — ‘help me understand’ — so we hold their hand and try to help them.”

Louisiana state law prohibits the use of one's home or direct-deposit Social Security checks as collateral with no faxing payday loans, but these people became entangled in multiple loans with payday loan companies and clearly did not read the fine print on the accompanying paperwork.

“They weren’t aware of the repercussions of the documents they were signing. The business knows what to do, what’s legal, what’s not, but it is the feeling of the bureau they do a real fast shuffle,” Gott said.

With seemingly innocuous names like Mr. Check, Money Mart and Cash Cow, the payday loan stores in Louisiana offer high-interest products that they say serve a need in the community, but that critics say should be outlawed, according to the Independent.

“Payday loan companies say their growth indicates there is a big demand for their services,” says Jordan Ash, director of financial issues for the national consumer group ACORN, “The same could be said for people buying crack cocaine. Lots of folks buy crack, but that doesn’t mean there’s a legitimate need for it.”

With names such as Doctor Check, Money Mart and Cash Cow, payday loan firms say their high-interest products fill a niche and feed a growing demand.

Critics of the short-term lending business are not buying it.

"Payday loan companies say their growth indicates there is a big demand for their services," said Jordan Ash, Director of Financial Issues for the national consumer group ACORN. "The same could be said for people buying crack cocaine. Lots of folks buy crack, but that doesn't mean there's a legitimate need for it."

ACORN claims a vast majority of stores are placed in minority communities, preying on the poor and elderly and dragging low-income wage earners and people who rely on monthly government assistance into deeper cycles of consumer debt.

Someone on a fixed income can take out a payday loan to cover an extra expense — unexpected medical bills, perhaps. Two weeks later, the borrower is forced to pay back the loan, usually less than $500, in full and with substantial interest. But their fixed expenses mean another personal loan may be required as soon as the first is paid off.

Thus, they become ensnared in the payday loan trap, say consumer advocates. But others, like Steven Schlein, spokesman for the Consumer Financial Services Association, describe ACORN's position as unfounded and inflammatory.

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A new type of small loan in Louisiana that would use autos as collateral and charge interest rates of 25 percent per month has drawn heavyweight lobbyists and consumer advocates groups into a heated legislative debate.

The Times-Picayune reports that a group promoting conservative social values (which rarely takes positions on financial legislation), has come aboard the campaign against the proposal. The Louisiana Family Forum is steadfastly opposed to the measure.

Sponsored by Sen. Edwin Murray, a New Orleans Democrat, Senate Bill 743 would create a Louisiana Motor Vehicle Title Loan Act as a way for people with bad credit to obtain short-term cash — at risk of losing their car if they don't pay it back quickly. This is similar to how payday loan firms operate in that those with poor credit and little collateral can qualify.

"The interest rate is high, there's no doubt about it. But without this bill there's really no place for them to go," Murray said.

But consumer advocacy organizations aren't buying it.

 

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