Payday Loan Lowdown

Low-income Arkansans lose more than $68 million annually to payday lenders thanks to loopholes in the state’s payday lending law. The Arkansans Against Abusive Payday Lending collated this figure. In its report, the group stated that the 1999 law, which regulates the industry, is full of gaps that allow payday loan operators to prey on the poor. And the saddest thing is that the state agency, which is supposed to oversee payday loan operations, is lax in the enforcement of the few rules that exist.

So poor Arkansans who are already finding it difficult to make ends meet, are forced to pay the price. According to experts, the biggest problem is caused by the 1999 Check Cashers Act, which allows the payday loan industry to grow in Arkansas. This industry has also managed to circumvent the state constitution, which limits interest rates on consumer loans to 17 percent annually. And what does the Arkansas State Board of Collection Agencies, which regulates the industry, have to say about these accusations? Nothing much, except that they are ’simply not true’!

Consumer activists blame the 1999 Check Cashers Act for allowing the payday loan industry to expand in Arkansas and circumvent the state constitution, which limits interest rates on consumer loans to 17 percent annually. There have been other studies in Arkansas that show that most payday loan stores that operate in Arkansas are located near military bases and largely target minorities, the elderly and the low-income.

The worst part is that seventy payday lenders licensed by the state are not regulated due to the state board’s "soft" interpretation of the 1999 act and another 139 payday lenders that operate in the state offer usurious loans are not regulated by five-person regulatory board. The saddest part is that these facts have been around for quite some time now and the lawmakers don’t think it is important to take any action.

If you have ever defaulted on the payment of your credit card debt, you will know that a typical payday loan is more expensive than a credit card late fee. And yet, people queue up to get money from businesses that are out to squeeze them dry of their last dollar. If you are ready to forego of payday loans and use viable alternatives, then look at this list.

One of the alternatives involves taking an advance from your employer. Ask your company. Your employer may grant paycheck advances to employees. And since this is an actual advance on your salary and not a loan, you can forget about interest rates. However, if you are faced with a serious debt problem, you could directly speak with your creditors. Quite a few creditors agree to negotiate partial payments if a payment plan is in place. And if you are in serious trouble, there are the credit counseling agencies that can help you work out a debt repayment plan with your creditors.

I know this bit of news is a bit old, but hey who cares? Whenever a payday loan center shuts down, it’s time for some partying. In this instance, it is a Mountain Home check cashing business that has closed, partially complying with an administrative order issued last month. Baxterbulletin.com reports:

Investigators with the Arkansas State Board of Collection Agencies found the 14 stores operated by Dennis Bailey of Fordyce, including Fast Cash of Mountain Home, have closed, said Peggy Matson, executive director of the State Board of Collection Agencies Check-Cashers Division. A sign on the door of Fast Cash of Mountain Home on State Highway 62 East directs customers to call BMB Finance Company, a business Bailey owns in West Plains, Mo.

Read more: Payday loan company shuts doors in MH

While payday loans are bad in general, they are especially disastrous in the case of lower-income families. A recent report by the Brookings Institution concludes that low-income families generally pay more than upper-income families for the same consumer item or service, largely because they rely on alternative providers like check-cashers, pawnshops and rent-to-own stores. Buffalonews.com reports:

The report said reducing these extra costs of living for lower-income families by just 1 percent would give them more than $6.5 billion they could use to buy a home, save for retirement or pay for education and health care for their children.

Read more: Report urges curbing abuses against poor

Did you know that in last five years, relief societies have paid over $2.5 mn to help troops out of debt? One wonders why our famed armed force is so weak and unable to fight predatory payday lenders. Estripes.com reports:

Though paycheck-lending agencies aren’t springing up around military bases in Japan and South Korea like they are stateside, U.S. servicemembers needing quick cash or lower monthly credit debt payments still get caught in the “downward spiral” of predatory practices, Finch said. In Japan, U.S. servicemembers find them online.

Read more: Payday loans aren’t the answer to financial woes

Here is a simple lowdown on payday loans for the uninitiated. Payday loans are short-term loans for employed people. This helps employed people to tide over difficult situations where they need money immediately and cannot wait till their salary is due. These loans are very convenient and handy, but have one small problem — a high interest rate. Interests on payday loans have been known to cross the 500% mark!

The good thing about payday loans is that you don’t have to wait for a credit check by the company. A payday lender doesn’t need to know your credit history and they will not bother to ask you for it. While payday loan companies differ in the information that is required, most of them ask for the following information when you apply for a loan: Proof of employment, proof of a checking account, last bank statement, social security and driver’s license numbers, and proof of residency.

To apply for a payday loan, you only have to give your lender a personal check for the amount borrowed plus a fee. Payday lenders allow consumers to write a personal check for immediate cash as long as they have a job and a checking account. The lender agrees to hold the customer’s check until his or her next payday.

And how do you get the amount? Once the company approves your payday loan, the money is deposited into your account. This is done pretty quickly, usually by the next business day. If you cannot repay your payday loans on the date specified, you can extend the loan period. You will only have to pay an additional fee.

You can change your mind about a payday loan without incurring any cost as long as it’s no later than the end of the next business day. You must tell the lender and return the cash. The lender must return any fees charged.

Payday loans form a vicious cycle of loan and debt and getting out of this cycle is extremely difficult. Most American families are today living paycheck to paycheck, and most don’t have much savings or even conventional credit like a credit card, etc. This makes it extremely difficult for such people to handle any unexpected expense. At a time like this, a payday loan seems like your best friend at a time like that.

However, when it is payback time, you realize that this was not the friend you thought it was. The main reason is that the money from the first loan is taken from your next paycheck. This means you have less income than you are used to. So, you are behind on your usual expenses and what do you do to make up for this shortfall? Get another loan or renew your current loan. Rocklintoday.com reports:

Don’t look for a consolidation loan or program before you first figure out how you can start to live on what you earn, and then begin to save money. Help is available for you and others who are trapped in this circle.

Read more: Save, budget to defeat payday-loan cycle

I’m really not surprised to know that payday loans are one of the fastest growing businesses across the United States. I mean if you cannot make ends meet with your earnings, you would go in for a fast cash loan. And that explains how there are more than 22,000 payday stores across the country. And our lawmakers prefer to ignore this festering problem. Abqtrib.com reports:

The closest New Mexico has come to curbing the payday and car-title lending industry is a set of proposed regulations worked out by the governor’s and attorney general’s offices and announced in May. If they pass the muster of public input, they could go into effect as soon as next month.

Read more: Lawmakers work to make payday loans more manageable

Irrespective of the many names that have been attributed to them, payday loans survive and thrive because of their immense popularity. Their popularity stems from the fact that they are easily and quickly available to the person in need. You may just have been put in the unenviable position of unexpectedly needing some cash and being “caught short”.

You might have had an unexpected medical bill or car repair bill, or you might have to travel unexpectedly, like in the case of a death in the family. Others who need quick cash use it to pay their everyday expenses, like rent, groceries, utilities, etc. Whatever the reason, you need that cash and you just don’t have it. So, what do you do? Walk into the nearest payday loan center, complete the formalities and walk out with the money you require. Simple!

Many American families are today living paycheck to paycheck — a very dangerous situation to be in because the smallest problem can mean you are short on money and are forced to depend on other sources like payday loans. One of the many problems with these types of loans is that until you can break the cycle of borrowing, repaying and borrowing again, you never really catch up. Azstarnet.com reports:

Contact a reputable credit counseling organization, and it will help you by putting together a spending plan that will allow you to finally break the payday-loan circle. You might start by contacting a member of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.

Read more: There are ways to climb out of your payday-loan hole