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The Fight To Cap Payday Loans

By Eddie Farah

PayDay Loans. If you see them you should run the other way.

Florida is among a few states that has tried to stop the abusive high interest loans.

In the average scenario, a person takes out a high interest loan with phenomenal interest rates, up to 400 percent in some cases. The average borrower ends up paying back about $800 on a $300 loan, according to The Center for Responsible Lending. One payday loan can lead to another payday loan to pay off the first, called a rollover.

A couple of bills introduced in Congress will help address the abuse on borrowers.

Already military families are protected by the cap that Congress applied in 2006. 15 states plus the District of Columbia have stopped the consumer abuse by imposing a cap in the 36 percent range.

Florida has tried payment plans but that has not slowed down the number of trapped borrowers.

But pawn shops say if S. 500 passes they will have to close their doors. The shop owners say that the average pawn loan is just $80 so the high interest is needed just to stay in business. Unfortunately the payday loan industry is a growth industry right now, so right now is the time to address this out of control experiencing a growth during these tough times.

S. 500 would put a cap of 36 percent on the interest borrowers would have to pay for these short term loans. The bill is directed at payday and car title loans. S. 500 was introduced by Illinois Sen. Dick Durbin and California Rep. Jackie Speier introduced H.R. 1608, that also puts a 36 percent annual interest cap on consumer loans.

Putting a cap on the double or triple-digit annual interest rate is the only way to stop abusive payday loan flipping.

Originally posted at InjuryBoard by Eddie Farah

Full post as published by Jacksonville Personal Injury Lawyer on April 10, 2009 (boomark / email).