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.

1 comment to The Ugly Truth about Payday Lending

  • It is amazing to me how much complaining there is about a product that gets so much bad press when it’s time to pay back the loan. Like any idustry there will be bad players. Most online lenders – Indian Tribe or otherwise – disclose every fee and the repayment terms. No one is forcing the borrower to take the loan or to drag it out over multiple payments. We live in America, you can choose NOT to agree to the terms and find another alternative! To be clear, what should these lenders do? NOT charge for a service that is completely unsecured?? For that matter, why don’t we tell Mercedes Benz to stop charging so much for their cars so that everyone can afford them! How many of these loans go bad?? A LOT. How many millions of Americans DON’T complain about a loan that no one else (aside from the thug on the street corner) would even offer them?? Why don’t you get that message accross? The new mantra in this country is: when a company makes a profit, they should be torn apart and maligned. Where is the personal responsibility? It’s very easy to look at someone with cancer or in trouble and go after the “villian” that was there at their time of need and complain at how vile it is that this poor sick person was taken advantage of. Seriously?? Who else was there when this person needed help? Why not hold his other debtors to the same standard? Why don’t we just let him off the hook for ALL his bills because he is sick? Why? because it is so much easier to blame the Payday Lender!

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