How Effective Has Colorado Payday Loan Legislation Been Really

Colorado has seen an interesting trend in payday lending.  Payday lenders in the state dropped more than 14 percent, and the number of loans made by these lenders saw a decrease of close to 60%.  The annual analysis of subprime lending done by the attorney general highlighted the decrease, claiming it was a direct result of legislation passed in 2010.  The legislation the attorney general is referring to limited the dollar amount of payday loans as well as the interest that could be charged on them.

The Denver Democrat that sponsored the law, Mark Ferrandino, claims the law is working as intended to help Colorado workers that are vulnerable to the predatory lending practices often associated with payday loans.  They can find a service provider if needed, but consumers are no longer routinely ensnared in a major web of debt by payday lenders. Another reason for the decrease, not as widely touted, is the increase in unemployment in Colorado.  Payday loans are restricted to those that have a job.

The most interesting part of the trend however, is the fact that despite the decrease in payday loans, there was a sharp increase in small-installment loans.  The increase was as much as 180%, which was quite drastic, but understandable if you consider the difference between the two types of loans.  For example, payday loans are capped at $500 and have a repayment term increased to 6 months from two weeks.  They also carry with them interest rates that can work out to be as high as 159% annually.

Alternatively, small-installment loans can be taken out for as much as $1,000, have terms ranging from 90 days to a year, and interest of generally around 10%.  The choice is clear for most. Despite the jump though, payday loan use still overshadows small-installment loans 70 to 1.

The fact that they are still that much ahead is amazing when you look at the numbers.  Payday loans average around $375 with average finance charges of $237.  The contrast of the average $380 small-installment loan with $80 in finance charges is sharp.   Of course there is also the fact that in the state of Colorado there were only 5 companies licensed to make small-installment loans last year, the year used in the study.

What is the moral of this story?  Consumer advocates can celebrate a victory in the idea that legislation meant to regulate payday loans is working as intended, but the fact that other issues played a huge factor in the decrease cannot be ignored.  It may be a step in the right direction, but how big of a step remains to be seen.

New Payday Lending Legislation in Texas Good, But Not Enough

Consumer groups in Texas are happy with the legislation that has been passed in the state regarding payday lending and auto title loans, calling them “good first steps.”  They generally agree the laws are a step in the right direction, but they are not enough.  More needs to be done to get the industry under control and protect borrowers from the debt spiral many believe are common with these types of short-term credit solutions.  In Texas, the industry has grown in recent years with little regulation until the most recent legislation passed in 2011.

 

This new legislation, which went into effect on January 1, requires state licensure for these businesses as well as specific disclosures to borrowers about fees.   This has garnered a significant amount of industry data that could be useful for further legislation.  For example, 3,000 CABs, or Credit Access Businesses, have been approved for licenses since the law went into effect.  Also, after a review in September it appears that 90.9% of such businesses are compliant with the requirements of the laws.   The general idea of the law seems to be working, but consumer groups still maintain that until fees are capped, borrowers are at the mercy of these short-term credit businesses and face financial ruin despite disclosures of fees.  No on in a situation to need such a service is going to be likely to turn down needed cash due to fees.

 

Despite the lack of cap on fees, one very positive feature of this most recent legislation is that is gave the state of Texas the ability to enforce the federal Military Lending Act, something it could not do before.  Local cities are also passing their own ordinances, but the state is being encouraged to reinforce its intent for uniformity in the way these credit facilities are treated throughout the state.  The fact is, they are likely here to stay, and the service could be useful if better laws were in place to protect borrowers from getting trapped.  That is just what consumer advocates and Church groups intend to make happen.

 

Though it is agreed this is a great first step, the issue is likely to be a hot one in the 2013 legislature.  While the industry does not take kindly to regulation, those that charge exorbitant fees and interest need to be reined in somewhat.  Failure to do so could result is dire consequences for borrowers and lead to catastrophe for an economy that cannot take much more.   Only time will tell how it plays out.

Pennsylvania Considering Making Payday Lending Legal

While the verdict is split on whether or not payday loans are a good thing, most everyone will agree that there needs to be some option available for short-term financing in emergency situations.  Until a better solution is offered, payday loans are pretty much it.  At least as long as they are available the option is there, and there is the potential that the loan could be paid off in time rather falling into the all too common debt trap common with those types of loan

 

It is a choice that is, unless you live in Pennsylvania, which has been able to keep payday lending illegal.  But that may be changing, and opinions on these potential changes are mixed.  In September the state Senate Banking and Insurance Committee is holding a hearing on the issue due to a revived attempt to get related legislation on the desk of Gov. Tom Corbett again before the end of the year.  Opponents fear it is a huge mistake, while supporters maintain that there has to be an option.  It did pass the House of Representatives, although narrowly, in June.  It was not acted upon before the Legislature dismissed to summer vacation.

 

According to a recent study by the Pew Charitable Trust, these loans appear to trap people in a debt cycle they cannot escape.  Statistics show that borrowers typically used the funds not for luxuries, but for living expenses.  As this bears out, it is not uncommon for them to not have the funds to pay the loans back fully in time, and thus more interest and fees accrue.  That is nothing supporters and opponents of the loan alike do not already know.  The problem is supporters feel that consumers have to have alternative financial options.  If there is an issue with bad credit, short-term financing in emergency situations can be very difficult, if not impossible to come by.

 

In this particular piece of legislation there are safety nets in place.  Loans are limited to $1,000 or 25 percent of gross monthly income.  They cannot be rolled over directly either, but rather borrowers would have to set up an extended repayment schedule.  This is more borrower protection than most states with legal payday lending have, but is it enough?  Only time will tell.  It is important to remember too that during the time the loan is taken out and the time is has to be paid back action can be taken to ensure the money is available to repay the loan on time.  This is the time to take an extra job, sell something, or whatever else is possible to pay the loan back on time and avoid the debt sink hole.

 

Alternative Financial Services Not So “Alternative” Anymore

Recently the FDIC released the “2011 National Survey of Unbanked and Underbanked Households.”  Its findings were somewhat surprising.  It showed that in the U.S. 28.3%, more than 1 in 4, households are unbanked or underbanked.  That is not the really surprising part though.  The really surprising part is that 25% of households have used alternative financial services in the past year, and 12% of all households have used alternative financial services in the past 30 days.  These services include payday loans, pawn shops, and rent-to-own establishment.  Keep in mind that to get a payday advance loan one must have an active checking account.

 

While 17million adults are under or unbanked, another 51 million are using alternative financial services despite bank access.  What does this say about the U.S. Banking system as a whole and so-called “alternative” financial services?  What is says it this.  While banks are not in danger of extinction, they certainly are not providing the affordable services Americans need.  The U.S. population has realized it has choices and they are taking advantage.  This migration from traditional bank services has resulted in once alternative financial services actually morphing into what are now becoming main stream financial services.

 

At what cost does this metamorphosis come?  Could it be that banks are pushing Americans to these other options, often times to their financial ruin?  Short-term credit solutions are often times all but non-existent in the banking industry.  If financial commitments come due before the next payday, consumers are going to go where they can get the quickest results for the least amount of money.  Sure, banks often offer overdraft privileges, but the immediate cost from fees due to this is astronomical.  While fees from payday loans may end up being just as much, they are not immediate, and there is a chance of avoiding them if the loan can really be paid off safely with the next pay check.

 

Why would you incur fees on the front end if you have a choice with another funding source?  If the bank fees are definitely going to make them worse off, then they are going to choose another source, and if that source happens to be a payday advance, at least they have a shot at making the money some way before they have to pay it back and avoiding fees.    It has become evident, especially to the payday lending industry, that alternative financial services are not necessarily so alternative anymore.

Banks Jumping Into the Payday Loan Pool

There is a new kid on the block when it comes to payday loans.  Local bank branches are now offering what they dub “advance direct deposit loans, ” and they are drawing fire for it.  The reason is that the funds closely resemble the controversial payday loans offered by lenders specializing in the service.

The problem is that these loans are granted based on regular direct deposits that are known to be coming.  Though they are billed as short-term, they often cause borrowers to sink into long-term debt.  Consumer advocates argue that the chances of borrowers having funds left for bills and necessities for daily living, after the loan is paid back with interest and fees, is small.  Therefore, they are forced to continue taking these advances until they are trapped. A group of 250 consumer, community, and religious groups asked federal regulators in February 2012 to stop banks from offering these types of loans.

While the rising demand for short-term loans has led some banks to recently begin this practice, Wells Fargo has being offering this product since 1994.  The Consumer Financial Protection Bureau (CFPB) is now keeping a closer eye on banking institutions offering these types of loans the same as they are standard payday lenders.

The banks are quick to defend themselves, noting they are simply offering a legitimate service that meets a need for a portion of their customers.  Quick cash has become a common need for many, and banks offering this service maintain that the loans are monitored to ensure customers do not use them irresponsibly.  They also offer information in the form of literature and guides to their products stating that the loans are expensive and only meant to be a short-term solution.  One bank included bold print declaring how expensive the product is, and that it is only meant for short-term, unexpected credit needs. Customers are also warned not to borrow more than what they can pay from their next deposit.  Representatives at Wells Fargo maintain, “The service was designed to get customers through emergency situations, not to solve their long-term credit needs.”

What is the result of these banks jumping into the payday loan pool?  In January of 2012 the director of the CFPB noted that the agency would be paying special, close attention to the products as well as the banks offering them.  How it all plays out remains to be seen, but most maintain that despite lower fees, advances on direct deposits are still in the same class as payday loans.

Rate Cap on Payday Loans Not Making It To the Ballot In Missouri

It seems that, for now anyway, interest rates will stay the same for payday loans in Missouri.  Supporters of a rate cap have given up trying to get the initiative on the ballot.  In the end, it was the funding that made the difference.  The law, which would cap the interest rates on payday loans at a respectable 36%, will sadly not make it to a vote this time around.  This means the rates will continue to be way above this at their average of 445% per year.  The crippling rates will continue to send the neediest of the state into a spiral of debt if something is not done, but whatever is to be done, this will not be it.  The best bet is likely education.  There is a place for these loans, but an interest cap would help a lot.

So what happened?  Grass-roots supporters started a petition to get it on the ballot, but why did they not follow through?  Well, despite countless volunteers and support from Churches and other advocacy groups, the payday loan industry simply had more money.  They spent more than $2 million fighting to keep this measure off the ballot.  This should tell the state something.  They know what they are doing, and they do not care.  They also know that had the measure made it to the ballot, it would have passed.  They were scared.

The action they put to their fear paid off, as they made it all but impossible for supporters of the bill to get the signatures they needed to get the job done.  The poor and working class of the state are who will suffer however, and it brings up another serious issue.  The opposition funneled every bit of their money through a not-for-profit that has not to date named its donors, while supporters accounted for all of the $600,000 they spent, as is noted in reports from the Missouri Ethics Commission.

What does this say for the ability of those in the state to take action for something they believe in?  Does it mean it is pointless?  Payday loans are the issue this time, but it could be anything.  It seems that if the opposition is rich enough, there is no point.  For now, the best bet for those concerned about the issue is to make sure the truth about payday lending is out there.  People should know that they are available if needed for the short term, but they also need to be aware of exactly how much it could cost them in the long term.

California Considering an Increase In Payday Loan Limits

In California, a bill to increase payday lending limits in the state has been dormant since last summer when it was passed with support from both parties.  However, Assemblyman Charles Calderon, a democrat, is trying to revive the bill in the Senate.  Consumer advocates maintain that if this does happen, the bill must be amended to increase borrow protection.

This bill, known as Assembly Bill 1158, would increase the limit on payday lending to $500, up $200 from the previous limit of $300.  The problem is that even at $300 borrowers only actually receive $255 and many cannot pay that off in time.  This results in more and more loans, each one at the price of $45 and an interest rate equivalent to 460% per year. The debt cycle only continues until there really is no way out for many.

The damage is real, and it is recognized by congress.  In fact, due to fear that they could damage the readiness of troops to serve, they have now banned members of the military from taking out payday loans.  San Jose has also issued restrictions on new storefronts for payday lenders due to concerns over their effect on the low-income community.

Changes requested of Assemblyman Calderon include first and foremost a six-loan limit per household.  Another change intended to protect borrowers is an increase in the terms of these types of loans from 2 weeks to 31 days, allowing extra time to pay the loan off. It is also suggested that lenders be required to actually consider a potential borrower’s ability to pay, rather than offering funds to pretty much anyone who applies.

Other states have seen success in regulating the industry by instituting a rate cap, but in Sacramento payday lenders are so influential that consumer advocate groups have pretty much abandoned this path.  The consensus remains, however, that if state legislators allow the increase to $500, these amendments are necessary to decrease the potential damage these loans can cause.

Payday loans have been banned altogether in many states, but that is not even a consideration for the most part in California.  The only hope of mitigating the risk of damage to the borrower is for legislatures to increase borrower protection.  These amendments are a good start, and borrower education could further aid the cause.  One thing for certain is that to many consumer groups in California, it appears that those less fortunate cannot rely on their lawmakers to protect them from shady lenders.

Things to Consider Before Applying for a Loan

Before you take out a payday advance, there may be some questions and concerns still lingering. Some of the most common concerns include:

  • Why do people get a payday loan?

These loans are short-term and offer financial assistance to the applicant in-between paydays. The borrower writes a check for the amount of the loan plus additional finance charges. 

  • When does the loan have to be repaid?

Typically, the basics behind this loan are that it is short-term and most lenders require the loan is repaid on the next scheduled payday. Some lenders allow an extension which may be subject to additional fees and penalties. 

  • Are there fees associated with this type of loan?

These loans are based on the applicant’s income, which ensures the applicant won’t have a problem repaying the loan on their next payday. Most payday lenders have fees associated with these types of loans. The fees are usually based on the amount borrowed and may vary depending on the lender. If a loan isn’t paid back in a timely manner, the borrower may be subject to other fees and penalties. 

  • What kind of qualifications do I need to get approved?

To qualify for a loan, an applicant typically needs:

  • A valid driver’s license/state issued ID
  • Steady Income or Proof of employment
  • Have a valid checking account in their name

(Some lenders require credit checks, valid contact info such as a telephone number or email address, and some lenders may require references, etc.)

 When can I apply for a new loan?

Once the current loan is repaid, most lenders make an applicant wait 24 hours before they can apply for another loan.

  • Is a credit check required for this type of loan?

No. Although some lenders may check credit, the majority of lenders do not. These loans are based solely on an applicant’s income and are repaid on the applicant’s next payday. 

  • How much money can I get a loan for?

Income, banking information and proof of employment are the main things considered when the lender is deciding on how much money to lend. First-time borrowers may only be approved for a minimum amount, but most payday loans range from $300 to $1000.

  • Do I need collateral to apply for a payday loan?

No. Collateral is not necessary or required to utilize these pay advanced services.

 

To sum it up, payday loans offer the money you need, when you need it the most!

The Ugly Truth about Payday Lending

In this economy, people struggle daily with financial worry and stress. They find themselves living paycheck to paycheck and often broke once payday comes around. They lean on the helping hand of a payday lender in order to have extra cash and pay delinquent bills. Last year alone, over 11 billion dollars, was lent out causing the payday loan business to become one of the fast growing and profitable businesses online.

Unfortunately, a payday advance leads to fees that must be paid when the advance is paid back to the lender. Sometimes that fee is high depending on the loan amount and the lender.  According to CBS News chief investigative correspondent Armen Keteyian, “The money often comes with crippling rates”.

A man named Ramon Zayas faces piles of bills due to him suffering from prostate cancer. Zayas stated “I had to pay the electric bill, or have the lights turned off.” Ramon and his wife decided to borrow $250 from an online payday lender, 500 FASTCASH. The annual interest rate for his loan was a whopping 476 percent. Zayas stated he thought this whole time he was paying off the loan, but in fact, was paying off weird fees and interest. The interest alone made this $250 loan, cost him $125 month. The fees kept increasing leaving him in a huge deficit.

Zayas states that he borrowed $250 thinking he would pay back $325 but instead ended up paying $700. If he hadn’t gone to the bank to stop this outrageous scheme, it would have cost him $1,100.

Because of cases like this, 17 states have successfully banned payday lending. Zayas’ lender is protected from state laws because the payday lender is by an Indian tribe. In fact, over 30 online payday lenders are associated with American Indian tribes.

According to Rick Brinkley, “If you can become affiliated with a tribe, and be able to avert local and state laws, in my opinion, apparently loan sharking is legal in this country.” Brinkley operates the BBB in E. Oklahoma and received over 2,000 complaints and says “it’s unclear who is behind some of these operations.”

It’s been said that many of the letters coming back from payday companies don’t even have signatures on them. “They just say ‘compliance office’,” Brinkley replied.  “What does that tell you?” “It tells us that they don’t want us to know who they are.”

Just two weeks ago, the Federal Trade Commission took legal action against an online payday company associated with an Indian tribe.

This is a first and they are hoping the outcome works in their favor.

MyPaydayLoan.com Review

Many people shy away from lenders because they are embarrassed by a blemished credit past. Mypaydayloan.com does not care what your credit past looks like and is here to help with all of your financial needs.

The mission behind mypaydayloan.com is to provide a convenient online service where clients obtain a payday loan right from the privacy of their homes.  They maintain a user-friendly website and strive to sympathize with their customers.  They understand the stress a person goes through when life presents a hardship and guarantee they offer the best in customer service.

Their main goal is to be the official online payday leader due to their hard-work, dedication, loyalty and customer satisfaction.

In order to be considered for a loan, you must meet the following criteria:

  • A steady job/guaranteed income of $1000.00 monthly
  • Customer is required to have an active checking account that is at least 3 months old.
  • Must have a valid driver’s license/state-issued ID
  • You must have email/internet access for contact purposes.

A payday advance is the best type of loan option for people with bad/no credit. These loans give you quick cash to use on anything you need! The money can be used to pamper yourself, pay unexpected bills, medical emergencies and so much more. It’s your money; you decide how to spend it!

Another convenience is that you don’t have to mess with unnecessary paperwork. Once you apply for your payday loan/cash advance, you can receive your cash the next business day. The friendly staff is on hand to answer any questions or concerns you might have.

The company states that a borrower will quickly see the many benefits to using them as your online payday lender.

Benefits such as:

  • Friendly staff on hand to answer all questions
  • No paperwork or faxing required
  • Faster approval process
  • No credit checks

Mypaydayloan Company Information:

Based on factors by the Better Business Bureau, the company has no customer complaints or reviews available at this time.

BBB Rating: No current rating

Total BBB Complaints: 0

Dated Opened: Unknown

Principal: Unknown

Business Address: Unknown, South Plainfield, NJ 07080

Business Phone: Phone: (888) 269-2303

Business Email: Unknown

Business Website: www.mypaydayloan.com

Loan Maximum: $1000.00

 

Most payday advance companies require paperwork which can slow down the approval process and delay your loan. Mypaydayloan knows that these times can be stressful and guarantee to get you as quickly as possible.

They strive to be your #1 source for online payday lending.