I had no interest in a loan or their company but knowing that the Feds now require full disclosure of true annual percentage rate (APR) in advertising - I looked for the rate in the brochure. Sure enough, there it was, last paragraph on the bottom back, in print so small even my trifocals steamed up:
"The APR for a $360 Advance (which includes a $60 fee paid to C*** America Financial Services,Inc., that is included in the loan amount) for 14 days is 533.33% with one payment of $361.37 due at maturity." Then they got the chutzpah to add: "Borrowing costs increase significantly when the full amount due is not paid on the maturity date." 533.33%!!!
Knowing these interest rates are being foisted on those folks that can least afford them, the payday-to-payday poor and young folks, I started Googling around. The more I uncovered, the more incensed Ole' Pecoz became! Here's one source -The loan process:
Retail lending
Borrowers visit a payday lending store and secure a small cash loan, usually in the range of $100 to $500 with payment in full due at the borrower's next paycheck (usually a two week term). Finance charges on payday loans are typically in the range of $15 to $30 per $100 borrowed for the two-week period, which translates to rates ranging from 390 percent to 780 percent when expressed as an annual percentage rate (APR) The borrower writes a check to the lender in the full amount of the loan plus fees. On the maturity date, the borrower is expected to return to the store to repay the loan in person. If the borrower doesn't repay the loan in person, the lender may process the check traditionally or through electronic withdrawal from the borrower's checking account.
If the account is short on funds to cover the check, the borrower may now face a bounced check fee from their bank in addition to the costs of the loan, and the loan may incur additional fees and/or an increased interest rate as a result of the failure to pay. For customers who cannot pay back the loan when due, members of the national trade association are required to offer an extended payment plan at no additional cost. In states like Washington, extended payment plans are required by state law.
Payday lenders require the borrower to bring one or more recent pay stubs to prove that they have a steady source of income. They are also required to provide recent bank statements. Individual companies and franchises have their own underwriting criteria.
Retail lending
Borrowers visit a payday lending store and secure a small cash loan, usually in the range of $100 to $500 with payment in full due at the borrower's next paycheck (usually a two week term). Finance charges on payday loans are typically in the range of $15 to $30 per $100 borrowed for the two-week period, which translates to rates ranging from 390 percent to 780 percent when expressed as an annual percentage rate (APR) The borrower writes a check to the lender in the full amount of the loan plus fees. On the maturity date, the borrower is expected to return to the store to repay the loan in person. If the borrower doesn't repay the loan in person, the lender may process the check traditionally or through electronic withdrawal from the borrower's checking account.
If the account is short on funds to cover the check, the borrower may now face a bounced check fee from their bank in addition to the costs of the loan, and the loan may incur additional fees and/or an increased interest rate as a result of the failure to pay. For customers who cannot pay back the loan when due, members of the national trade association are required to offer an extended payment plan at no additional cost. In states like Washington, extended payment plans are required by state law.
Payday lenders require the borrower to bring one or more recent pay stubs to prove that they have a steady source of income. They are also required to provide recent bank statements. Individual companies and franchises have their own underwriting criteria.
Internet lending
Online payday loans are marketed through e-mail, online search, paid ads, and referrals. Typically, a consumer fills out an online application form or faxes a completed application that requests personal information, bank account numbers, Social Security number and employer information. Borrowers fax copies of a check, a recent bank statement, and signed paperwork. The loan is direct deposited into the consumer's checking account and loan payment or the finance charge is electronically withdrawn on the borrower's next payday.
Online payday loans are marketed through e-mail, online search, paid ads, and referrals. Typically, a consumer fills out an online application form or faxes a completed application that requests personal information, bank account numbers, Social Security number and employer information. Borrowers fax copies of a check, a recent bank statement, and signed paperwork. The loan is direct deposited into the consumer's checking account and loan payment or the finance charge is electronically withdrawn on the borrower's next payday.
Examples
For example, a borrower seeking a payday loan may write a post-dated personal check for $460 to borrow $400 for up to 14 days. The payday lender agrees to hold the check until the borrower's next payday. At that time, the borrower has the option to redeem the check by paying $460 in cash, or renew the loan (a.k.a. "flip the loan") by paying off the $460 and then immediately taking an additional loan of $400, in effect extending the loan for another two weeks. In many states, "flipping" or "rolling over" the loan is not allowed. In states where there is an extended payment plan, the borrower could choose to opt into a payment plan. If the borrower does not refinance the loan, the lender may deposit the check. In this example, the cost of the initial loan is a $60 finance charge, or 390% percent APR.
When the Consumer Federation of America conducted a survey of 100 Internet payday loan sites, it found loans from $200 to $2,500 were available, with $500 the most frequently offered. Finance charges ranged from $10 per $100 up to $30 per $100 borrowed. The most frequent rate was $25 per $100, or 650% annual interest rate (APR) if the loan is repaid in two weeks.
For example, a borrower seeking a payday loan may write a post-dated personal check for $460 to borrow $400 for up to 14 days. The payday lender agrees to hold the check until the borrower's next payday. At that time, the borrower has the option to redeem the check by paying $460 in cash, or renew the loan (a.k.a. "flip the loan") by paying off the $460 and then immediately taking an additional loan of $400, in effect extending the loan for another two weeks. In many states, "flipping" or "rolling over" the loan is not allowed. In states where there is an extended payment plan, the borrower could choose to opt into a payment plan. If the borrower does not refinance the loan, the lender may deposit the check. In this example, the cost of the initial loan is a $60 finance charge, or 390% percent APR.
When the Consumer Federation of America conducted a survey of 100 Internet payday loan sites, it found loans from $200 to $2,500 were available, with $500 the most frequently offered. Finance charges ranged from $10 per $100 up to $30 per $100 borrowed. The most frequent rate was $25 per $100, or 650% annual interest rate (APR) if the loan is repaid in two weeks.
Pardners, back in my military days, they used to throw those "$5 for $3" barracks hustlers of payday loans in the stockade or drum 'em out of the corps! Now these thieves operate in the open on your street corners. Our elected legislators, in our States and in Congress, have written the enabling legislation for these sharks. If you were to loan your neighbor some money and charged him more than 6% in Texas --- you'd be breaking the usury laws...!! If a company charges you more than 24% or 4 points over the prime rate -- they'd be breaking the law!
You gettin' mad yet? Gettin' mad enough to do a little Googling and e-mail writing? I hope so!
1 comment:
Golly, Pecoz, I think I'd be better off going down and seeing Uncle Vito at the Pompeii Pizza House.
His vig is usually only $5 per $10 borrowed, per month, and as long as you paid the vig, he wouldn't normally sweat the main amount. After all, we're all friends, right?
Of course, he'd send Bruno around with a baseball bat if you didn't pay up on time.
Hey, wait...that sounds a lot like the IRS when it's time to collect on taxes!
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