The weakest of our weak end up taking payday loans, from one of many predatory lenders in our society. The rate of interest makes old Shylock appear like a saint - it is only 32% - not per year, but per month!! 94% of the loans are paid back, so default ratios are incredible. Compare this with what we pay for lines of credit and other business loans - 4% per year!
Why can there not be a central fund to make these loans at a competitive rate of interest? Why can there not be a program to help people get out of this cycle of debt? Sadly, this program makes one borrow regularly, because most pay checks are gone to paying back the previous pay period's payday loan! Talk about bonded labor 21st century style!
Check this out: http://www.bloggernews.net/...
Lawrence Meyers in All News, Economic News writes to Terry McAuliffe asking that he stay out of the Payday Loans business as in Meyers' opinion it serves a useful purpose, and the impact is insignificant as only about 200,000 Virginians use these loans. Mr. Meyers feels that this is not a major issue and McAuliffe should focus on bigger issues! Mr. Meyers has listed loan options:
A) Borrow from friend/relative/employer
Cost: Zero
Risk: Complication of important relationship, embarrassment
B) Credit Card Cash Advance
Cost: About $1 per hundred every two weeks
Risk: Fail to pay; credit rating is damaged
C) Pawn something
Cost: $9.50 per hundred every two weeks
Risk: Fail to pay, you lose the personal item.
D) Payday Loan
Cost: Averages $16 per hundred every two weeks
Risk: A collection agent tries to recover what’s owed; no damage to credit rating; no personal item at risk; no personal relationship at stake.
Myth: "Cycle of Debt" - 94% of loans are paid back on time — that statistic is available in every single SEC filing of all public companies.
E) Online Payday Loan
Cost: $25 – 30 per hundred borrowed every two weeks
Risk: Same as regular payday loan, but industry is unregulated and identity theft is easier.
F) Bounce a check
Cost: Averages $45 per hundred borrowed
Risk: As soon as you bounce one check, you risk creating a domino effect, causing other checks to bounce and running those fees even higher.
What a crime on our society! Is it any wonder that we see so many defaults in unsecured debt? One of the reasons for the collapse of the financial markets is that China developed huge balance of payments surpluses, which was invested in US Financial markets, making easy money available, which was irresponsibly lent out to borrowers, who eventually did not have the ability to repay the loans/mortgages, and the rest is history. Every one knows what happened to our real estate and financial services industries, not to ignore the other industries that have collapsed due to irresponsible lending.
Is this what Mr. Meyers and the Payday lending businesses want? These are the businesses that should be promoting responsible borrowing, instead they work towards trapping borrowers into a life time of debt. These are borrowers who are not sophisticated, and desperate every month to get loans to tide over until pay day.
In effect, if they had a credit card they would not pay a penny in interest because they pay off their balances in full, every month!
But because they borrow from payday predatory lenders, they pay interest at 32%. Per month!
With good intentions, Virginia legislators and Mark Warner brought this menace into being. Time has shown this is not in any one's interest,and it is the worst form of exploitation. Simply because only about 200,000 Virginians are impacted, how can any one demand or even suggest that this be ignored?
Little drops of water make a mighty ocean - so let us solve little problems that can be solved and over time, the big problems will get under control.
McAuliffe initiated the opposition to payday predatory lending - other candidates have slowly expressed their willingness to oppose this practice. But the institutions of payday lending have attacked only McAuliffe, as it is kind of hard to attack the other candidates who have received money from these predatory institutions:
Deeds about $3,500; Moran about $27,000 and McDonnell about $38,000. The amounts could be more, this is as much as was known recently.
McAuliffe is a Virginian with courage, the courage to take on any one hurting Virginians. Is that not something we all should support?
I do.