We saw another article (from The Motley Fool) come through touting FINRA’s “recent” study that was conducted in 2009 (two years after the Talent Amendment went into law—a bill that made traditional payday lending to military personnel and families virtually non-existent).

The stat: Nearly one in three enlisted personnel or junior NCOs had used payday loans, auto-title loans, or other risky borrowing practices in the previous five years.

The reality: First and foremost, CFSA member companies do not market or provide two-week payday advance loans to the military.

Military personnel today rely on automobile title loans, installment loans, and online military loans for short-term credit needs. Unfortunately, reporters and public officials don’t make the necessary distinction among lenders and categorize all short-term loans to military personnel as “payday loans” which they are not.

The Defense Reauthorization Act of 2006 imposed a 36 percent rate cap on all loans to the military of less than 90 days. Lenders that provide loans that exceed 90 days are free to charge higher interest rates and they do. For example, Pioneer Services, a division of MidCountry Bank makes loans to the military for debt consolidation, automobiles, bad credit, and personal needs at interest rates and fees that add up to triple-digit APRs.

The Motley Fool seems to like the American Express program of paying people $300 to close their credit card accounts.

These people are fools.  The smart kind of fools.  Christmas advice from the MotleyFool:

 Ever had a really bad Christmas hangover? You know, the ones that leave you un-festively soldered to the toilet bowl for hours of endless, Santa-punishing pain?

Well, if you’re not careful with credit this Christmas, you could find yourself in a similar situation as regards your debt.

In fact, I’d argue that Christmas credit card debt is most stressful thing of all.

So if you’re using your credit card for your Christmas shopping, STOP! Make sure you’ve got one of The Best Credit Cards For Christmas Spending and are using your card correctly (for example, not making any purchases on a 0% balance transfer card). 

The Motley Fool exposes how banks are reaping a windfall from Ohio payday lending ban:  

Fifth Third Bancorp
Is there a link between the availability of payday lenders in a state and the amount that banks collect on overdraft fees? I’m not sure, but CAPS member Robermac suggests there is and notes that with payday lenders on the ropes in the Buckeye State as a result of a legislative defeat, regional banks such as Fifth Third stand to reap a windfall as a result:

Payday lending was defeated in Ohio and many payday lenders will close their doors. This will allow the fees collected by banks to skyrocket. Fifth Third bank is the largest regional bank with the most branches located in Ohio. When a [similar] law [passed] in [Georgia] a few years ago the regional bank gained [from] increased fees from bounced checks.

Here are some details of Fifth Third banks’s payday lending “alternative.”

TERMS:

 

·      Credit limit is based on total of monthly direct deposits (maximum of $500 or half of total monthly direct deposits-whichever is less).

·       Fee is $1 per $10 borrowed

·       A payment towards the advanced amount and fee is automatically made when the bank receives your next direct deposit. The bank will pay off any balance owed, up to the deposited amount, on the day of the deposit. If the advance is not paid in full prior to 35 days after the advance, the remaining balance will be deducted from the checking account.

 

The advance is paid automatically from the customer checking account when the next direct deposit hits the account, making the loan term anywhere from 1 to 35 days.  The APR varies greatly based on the loan term, ranging anywhere from 3,650% to 104% APR.  To actually receive a 120% APR loan, the APR quoted on the site, the loan term would fall between 30 and 31 days.  The bank takes on little, if any risk, by offering these loans, because they have direct access to the customer checking account the moment the direct deposit comes in to the account.  

We’re referring to the MotleyFool, which has a very interesting and hard-hitting piece today on Wells Fargo bank and other “alternatives” to payday lending.  From the piece: 

The FDIC began a pilot program this year to have traditional financial institutions offer micro loans at interest rates that payday lenders have said are unprofitable. While thousands of loans have been made, it’s not a runaway success because the banks are finding it hard to make money just as the payday industry has. One of the things not addressed in the pilot program, though, is providing loans to people with poor credit. Payday lenders do that every day; banks won’t loan money to someone who has bad credit.

Because they have the imprimatur of the federal government, banks have the right to employ the same programs payday lenders are castigated for. Perhaps that explains why they’ve been so vociferous in their support of restrictions on payday lenders: They just don’t want the competition.

The Motley Fool, which periodically comments on happenings in the payday lending industry, has this to say about recent developments in Arkansas.   There are still some sensible observers out there. 

“Arkansas’s attorney general wants to shut down payday lenders in his state, and he’s sent letters to some 60 companies doing business there, telling them to pack up, ship out, and — oh yeah! — forgive all the debts of the people who borrowed money from them…For individuals needing small bridge loans — well, tough luck! You can’t have one. 

The Motley Fool has a number of great tools and tips for personal finance.  The Payday Pundit loves these tools because they empower individuals by placing clear information on personal finance choices into individuals’ hands. 

One which the Pundit is enjoying exploring today is the “How much am I spending?” calculator. 

The calculator allows you to input your actual spending habits and your goals and then calculates how much you have available for investment and gives a projection of what that investment would amount to in 10 years. 

The Motley Fool picks up on the GAO report finding that, in 2006, consumers paid $36 billion in bank fees.  The Fool is highly critical of the government but also critical of consumers who don’t understand how much they’re paying in fees.  

How does this relate to payday lending?  Storefront payday lenders collected $6.5 billion in fees in 2006.  And payday lending customers understand exactly what they are paying per $100 for their two-week loan.  Members of CFSA are required to post their fees on poster-size displays in large type.

Yet, nobody is calling for a ban on banks.