A sure fire way to stay in debt-Use Payday lenders

A full three-quarters of the payday industry's loan volume is generated by borrowers who, after repaying one payday loan, must take out another before their next paycheck, according to the Center for Responsible Lending.

The report examined the loan activity of the more than 80% of borrowers who take out more than one payday loan a year. The borrowers generally opened new loans soon after repaying the old one, with 87% of all new loans occurring during the next pay period.

Nearly 59 million loans totaling more than $20 billion fit this pattern, accounting for three-quarters of all payday loan volume, the study found. The loans resulted in $3.5 billion worth of fees each year.

Payday loans require borrowers to sign over their next paycheck in exchange for a cash advance of a few hundred dollars with an interest rate as high as 400%.

Payday lenders target low-income families as they know they have few other options to borrow money.

In 30 of the states, lenders have convinced lawmakers to allow them to charge triple-digit interest rates because of the heavy demand. In some states, such as the District of Columbia, there has been a cap put on the interest rate which has proven effective in stopping predatory payday lending.

Isn't this called "loan sharking?" I'm not clear why these money changers are allowed to prey on the poor but it is evident in every large city I visit.

We do not have payday lenders in my neighborhood. I live in a nice community on the South side of Milwaukee. But go a few miles north and you see them everywhere.

With offers of "quick cash" and "instant credit" they give advances on paychecks, money for titles to cars, and quick solutions. The smiling and helpful salesperson assures the consumer that they are here to help; "Stop in anytime." What they don't emphasize is the 400% interest rate and the risk of losing your car. They don't worry that participants sink further and further in debt.

I don't understand why this industry is still in business other than the poor don't have a voice in politics. I can assure you, if payday lenders were setting up shop in affluent suburbs, there would be different laws.

Barbara Bartlein is the People Pro. For her FREE e-mail newsletter, please visit The People Pro.

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