Payday Loan Lowdown

Payday loan companies are howling now that they’ve been hit where it hurts. The lawyer of A-OK, a Canadian payday loan company, which was recently in the eye of a storm, is complaining that the firm is being “unfairly targeted”. Vicnews.com reports:

However, Michael Thompson of the Canadian Payday Loan Association criticized Justice Brown for jumping the gun just as the federal government was preparing to pass new laws. "I don’t think it is a precedent-setting case. The law on which the judge based her decision will soon be invalidated," he said.

Read more: Payday loan companies subject of class-action

We cringe when we think of repressed societies where decisions are made for people. We cringe when we think of others pressuring us to do things against our will “for the sake of our own good.”

We believe in free choice — and a free world where everyone can live as they please, and do what they wish. That is ideal for human beings, isn’t it?

Why, then, do we constantly end up making choices that are bad for us? History is witness to the fact that — time and again — when people have complete freedom of choice, they choose that which is not good for them — that which eventually destroys them.

Look at the greatest preoccupation of America, for instance — dieting. We are obsessed with our weight, and yet we are an obese nation — the fattest nation in the world today!

The humble television that was once a useful medium for news updates and the occasional movie has now attained giant proportions with its 24 X 7 availability causing people to become TV addicts and even alienate themselves from loved ones.

The freedom to spend money that we don’t yet have (payday loans, for instance) is causing us to go overboard spending lavishly, and ending up in a vicious debt cycle.

We smoke too much, we drink too much alcohol and coffee, we indulge in unsafe sex with multiple partners? all the paths that lead to the hospital (and later the grave) — all in the name of free choice.

So, now, is free choice good for the human being?

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Whether we like it or not, payday loans are a reflection of what is happening to our society today. These loans have been criticized ad nauseam — but are they really all bad? Let’s take a look at the arguments in favor of Payday Loans:

These loans are available for unforeseen emergency situations when you desperately need quick cash. Situations where people seek payday loans include unexpected medical bills, car repair bills, unexpected travel, or a death in the family.

The benefits of payday loans:

• There is no credit check involved.
• Payday loans, or cash advances, are extremely fast.
• The application process usually takes only a few minutes, consisting of simple fill in fields including your bank account information.
• Applications can be made in person, on the phone or on the Internet.
• The process takes less than 20 minutes.
• After submitting the application, the approval process begins, and is usually instant or only takes a few seconds.
• The majority of applicants are approved instantly and collect get their cash within hours.
• The loan amount is automatically deposited into your bank account within 24 hours.
• No up-front costs are involved.
• You don’t need to involve other people (discreet).
• Your financial information is not shared with others.
• Personal payday loans are available to almost everyone.
• Bad credit does not disqualify you.

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Her name could have been anything — Jane or Jennifer, but her story has a resonance and bears similarity to many other stories that are being repeated across the nation. She is a woman who only wants to do her day job, pay her bills and bring up her family. As the needs of her family increase, so do the expenses and that’s when the problem arises. It’s when you are in such a vulnerable situation, that you see a sign that you feel is your salvation. Only problem is that this sign, which says ‘easy money’, may just lead you into a debt trap from which you may find no escape.

Easy money or fast cash are the synonyms associated with payday loans. Of course, on that one count, the industry is quite truthful. You get the money fast and easy. However, it is only once you’ve taken the loan that your problems actually begin. Most lenders allow you to stretch the loan payback date — and usually, most people require this extended time. The company allows you to extend time for only one purpose though — it can then charge you exorbitant interest rates and you will not know what hit you.

Is this the face of things to come for the payday loan industry? It would definitely seem so. What am I talking about? The new card introduced by Bi-Lo that gives customers a credit line of up to $200 for groceries. Myrtlebeachonline.com reports:

"This is potentially moving the payday-loan transaction from the payday-lending shop to the grocery store," said Al Ripley of the North Carolina Justice Center in Raleigh. "This is very expensive credit. Our concern would be that if people are desperate for food, you run the risk of taking advantage of folks."

Read more: Bi-Lo offers grocery credit card for those short on cash

I’ve written and written on how bad payday loans are and of how the lenders are usurious. If you’ve ever taken a payday loan, you’ll also know how the rates are unbelievably high. Most people who have taken a payday loan seem to be caught in a debt trap and there seems to be no way out of it. And the worst part is when these payday lenders cheat you in addition to charging you unbelievable rates.

Now there are many other such seemingly okay rules, which are not actually allowed by the law. In case you feel that your lender has violated the Truth in Lending Act, you can file a complaint with the Federal Trade Commission (FTC). Call their Consumer on toll free: 1-877-FTC-HELP (382-4357): TDD: 202-326-2502. You can also use the FTC’s online complaint form to register your complaint. But be warned, the Commission cannot resolve your individual problem, but it can definitely act against a company if there is a pattern of possible law violations. So, don’t hesitate to file your complaint.

Here’s a bit of news, which will make payday lenders go, “I told you so”. Well, while the world thinks they are usurious and have a debilitating effect on people, there are others who think payday loans are not so bad after all. Some of them even advocate the need to allow military personnel access to payday loans.

A recent study funded by the Consumer Credit Research Foundation, a non-profit research group, found that military enlisted personnel have the same short-term credit needs as their civilian counterparts. So it follows that they should not be denied access to payday loans and other short term credit products. This report effectively refutes recent calls for the Department of Defense to limit the access of military personnel to payday loans. According to the report, any attempt to stop payday loans and other forms of credit could have unintended consequences. So the best thing to do is make the market more competitive so that the soldiers get a reasonable bargain.

You know what, I feel like playing the devil’s advocate today. Quite a few people’ve asked me why I always write bad stuff about payday loans. And they seem to have a point — I mean if I am writing a blog on payday loans, how come I never have anything good to say about them? Point taken.

One thing good about these loans is that they are an ideal source of quick cash for employed people with emergency cash needs. If you are in need of some cash in a hurry and can repay the amount borrowed with the fees within a short time interval, a payday loan is the thing for you. It’s another thing that most people can barely manage to repay the borrowed sum, and I haven’t even begun talking about the interest.

Fine, so where was I? So, what is it that makes payday loans so lucrative over other forms of loan? The fact that it is fast to secure. Of course, at the cutthroat rates that they offer, this is the least they can do in the form of customer service. Other benefits include the lack of a credit check and a history of bankruptcy does not compromise your chances of securing a loan. Wow! I mean, these guys are the most responsible lenders I have ever sawed! I mean they don’t want to know if you can repay. All they want is a check from you and they’ll lend you the money.

And if the APR rate is unusually high, don’t blame the payday lenders. After all, you should understand that it is a high-risk industry. So, the APR rate has to be kept high to justify the high risk.

I could go on and on like this forever and yet we would lead nowhere. I know payday loans are not bad — as an idea! But the idea needs to be worked on. In its present form, it is unacceptable but with a few tweaks, I’m sure, it’ll turn out to be one of the best financial tools of the 21st century. Go on, call me an incurable romantic!

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.

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.