Pay Day Loans - Loan Sharking Reinvented
We see advertisements for quick cash loans every day. These loans can be pay day loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans. Typically the borrower rights out a check for the amount of the loan plus a fee. This fee can range from 10% to 40% of the loan and the borrower usually has two weeks to pay it off in full. Most can’t pay it off in time and end up owing, in some cases, more in fees than the amount of the original loan.
Some states like South Carolina have placed limits on the fee amount allowed. South Carolina law limits this fee to 15% of the amount borrowed. If you were to look at this in a yearly APR it would be 390% interest. Most states have usury laws which limit a yearly rate to 30% or under. Currently Pay Day stores slip by by stating that loans are paid off in 2 weeks so no violation has occurred and that they are providing a much needed service to people that have no where else to go.
The actuality is that most of these borrowers cannot repay on time and so they are forced to pay the interest and take out another loan to cover the principle. Currently the average borrower in South Carolina takes 10-15 loans to payoff. These statistics are similar in other states. Which means the borrower will pay $400 - $500 in loan fees on a $400 loan. This is usury and should be illegal as it is not helping anyone. It is predatory lending that just gets borrowers in deeper debt than before.
“Some will say, that little man has to have somewhere to go,” said state Rep. Eldridge Emory, “Butif he gets money this way, he’s just digging a hole deeper and deeper, and he’s not going to get out.”
Several states like North Carolina have currently banned this form of predatory lending. Others are beginning to consider legislation to further control and possibly curb pay day loans. Still more needs to be done.
David Maillie is an alumni of Cornell University and specializes in biochemical synthesis for public, private, and governmental interests. He holds numerous patents and awards for his research. For more useful information please visit: http://www.bestbraindrain.com
