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Payday Loans, or Loan Sharks?

By Kurt O'Keefe, Attorney at Law

As banks go back to having lending standards, they turn down more borrowers.

A new industry has sprouted in between traditional lender, like banks and finance companies, and traditional loan sharks like HBO’s Tony Soprano.

They call themselves payday lenders.

Some states, unfortunately not Michigan, have outlawed these parasites.

Payday lenders charge effective annual interest rates of 400% or more.

We humans have a history of not closely following laws designed to protect us from ourselves.

No legislation can effectively force people to always make the right decision.

On of our fundamental rights is, to make our own mistakes.

If  the bank says no, and you think you have to borrow money, you go to the payday lender.

The payday lender requires you to sign a post dated check, for the loan, plus interest, usually due in two weeks, your next payday, hence the name.

As credit card limits et cetera have been lowered over the last few years, overall credit availability has decreased by hundreds of billions of dollars.

I thin the credit available is still too much.

For everyone but me, that is.

Payday lending is now a $40 billion industry, according to 60 Minutes.

Also from 60 Minutes:

“Ten years ago, they didn?t exist. Now, there are more than 22,000. There are more payday stores in America today than there are McDonald?s.”

Jim Blaine, with a North Carolina credit union, is quoted extensively in the story, and has the same opinion I do.

Compared to loan sharks, payday lenders are crooks.

Like drug pushers, they rely on customers being hooked on the loans, and rolling them over every payday.

In other words, as soon as they pay off one, they take out another, so they are always in hock to the payday lender.

You are free to make the payday loan mistake.

Don’t start down that road.

Payday Loans, or Loan Sharks?

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Full post as published by Bankruptcy Law Network on January 08, 2011 (boomark / email).