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Jun 27, 2008 -- Payday lenders charge up to 1,400% interest
Payday loans have grown exponentially in states where they're still legal. The Orlando Sentinel recently had a story about a lender who went way beyond what the law permits and charged 1,400% interest!
How can you know a payday lending operation if you see one? Well, they target people who are absolutely desperate for money. They're typically in well-lit storefronts and are staffed by friendly employees who work extended hours to loan money with no questions asked.
It's not unusual for a typical payday loan to have interest rates between 300% and 700%. That's a far cry from the 15% to 20% interest you may be paying on your credit card. The sad thing is that payday lenders aren't required to disclose their interest rates in states where their lobby has bought off legislators.
The military recently got Congress to protect soldiers from the threat of payday lenders; some servicemen and women had their finances demolished and weren't allowed to deploy. Now the rate on loans has been capped at 36% for military and their families. But Clark's heard anecdotally that certain payday lenders are ignoring this and sacrificing patriotism for profit.
Clark had the pleasure of testifying in a state legislative hearing when the payday industry was trying to get its practices legalized. He excused himself to the chairman several times and glared back at the audience, which was packed with payday lenders. Not that they cared. Payday lenders are sociopaths who financially kick you when you're down and don't care about the harm they visit to families.
So it comes back to you to be your own police officer, know the dangers and avoid them. Beware also that many payday lenders have migrated to the Internet.
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What others are saying
To the Free Marketeers...
The fact of the matter is that the United States does not truely have a "free market." If we did, we would have child labor and no minimum wage. The fact of the matter is that an unfettered free market would result in the abuse of workers. It's happened before in our history and, some may argue, it continues to happen. The fact of the matter is, while there are reputable businesses, there are some companies that take advantage of the less sophisticated or less powerful in our society. The fact is, these loans contain terms completely in favor of the company. Freedom to contract assumes a freedom to negotiate. There is negotiating when it comes to these pay day loan companies. Their contracting with people they know they can take full advantage of --and that's wrong. Freedom to contract and free market are the excuses the business owners tell themselves so they can look in the mirror every morning.
Individual Lenders
I have heard there are individuals out there that will loan other individual's money to pay off small credit card debt for a lower interest rate. How do I contact someone like this?
CLARK NEEDS TO GET OFF HIS HIGH HORSE
I'm sick of Clark demonizing certain industries.Calling them every name in the book(rats, snakes ,etc) is pathetic and childish. He is very wealthy and does not empathise with the situation of the downtrodden who truely need money. If the market demands someone pay a high interest rate because of bad credit rating, what right does Clark or the Government have to tell them they can not take a loan in the free market. These lenders do take risks because the chance of not getting paid from the downtrodden is VERY high. I do agree there needs to be clear disclosure, but thats it. Leave the free market alone. Clark claims he is FOR the free market, but he is not. No one is forcing these people to take the loan and they are only doing so because they are in such financial need. Who else is going to lend to these people?? You think Clark will every lend his millions to the downtrodden....no way...too risky! Millionare Clark will never understand this.
Stupidity
I want to sympathize with those people that are desperate enough to use payday lenders. They have gotten into a situation where they think they have no one else to turn to.
On the other hand, I wonder if bureaucrats are also going to outlaw the gamut of human foibles like stupidity, laziness, self-indulgence, self-delusion, etc. Why else would anyone be dumb enough to take out a payday loan? On the same vein, why would anyone be desperate enough to take out an ARM at 10% or more, and then complain when the rates go higher? There is no limit to people's capacity to blame everyone else for their problems and want someone else to rescue them.
lenders
If someone is willing to pay 1400% then so be it. I like the way the lenders are demonized. There would be no lenders if there were no borrowers. It is a two way street and let the market prevail.
protect idiots from themselves
The sad truth is that way to many people will borrow from these sharks even though they know the real costs of doing so. It allows them to delay for a week, a month or whatever to have to deal with their financial straits. If we closed down all the payday lenders, in the short term there would be a lot of financial distress on those borrowers. However in the long term, they would be better off because they would have to learn better how to deal with money.
free market chooses it
If I freely, contractually agree to pay 1,400% interest, then why is it any bereaucrat's business in a supposedly free country? If the fee is $25 to borrow $300 for two weeks, then duh - it doesn't take a rocket surgeon to ballpark what the effective interest rate is!
Nothing more than loan sharks
I thought loan sharking was illegal. I can not tell the difference between Payday loans and loan sharks. They claim they offer a valuable service but I only see they feeding off individuals already in a bad financial position. The government officials who support Payday loan services are corrupt and no better than the Payday loan crooks who hid behind bogus laws and regulations. Shame on America for allow this to exist.
Pay Day Loans
The statements aren't misleading. The APR is what it is. It's amazing --the way these pay day sharks try to justify charging usurious rates. The fact is that the people who obtain these loans shouldn't be given a loan at all --by anyone. Don't make it sound as if it's compassionate to loan someone money at 1,400% interest or that they someone deserve to be taken advantage of. It's greed that compells those interest rates. Loaning "these consumers" money at those rates only exaggerates their financial troubles --it doesn't solve their troubles. People who turn to this method of finance are usually in desperate situations and these company's take full advantage of their circumstances. It's deplorable.
Pay Day Lending
The statements are misleading. The APR on a pay day loan should not be figured as it is. There is no mention of the risk these consumers present to the lender. All of these people have checking accounts, so why don't they use the bank? We need to look at the entire picture and ask people who use these facilities why they use them instead of a bank. I do seminars on credit and have talked to them and have gained a different prospective.
