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Know the fees

Budget Blogger has an interesting take on how payday loan fees differ from credit card and bank fees: they’re actually easy to figure out.

It’s interesting that the group of lenders getting the “predatory lender” label also have one of the easiest tools available for determining what fees are permitted in each state.

CFSA’s website is a simple, straightforward tool for consumers to use to figure out how much a loan will cost them.  CFSA members provide that same level of transparency in their stores.  On the question of hidden fees and small print, between credit card companies or banks and payday lenders it’s really no contest.

Email of the day

From Chris, an Ohio payday lender:

In response to alternative small loans available in Ohio. I visited a bank yesterday who does offer smaller short term loans. They are not licensed under the small loan act, so the fees they charge to offer the smaller loans are not restricted by the small loan act. First, they charge a large loan origination fee, $159. Their interest rate is 18%, not 18%APR. In the example I was shown, a $1500, 90 day loan, actually has an APR of over 60%, with the bank grossing just under $400 for the transaction. Should the borrow not be able to repay at the end of the 90 days, the loan can be re-written for another $159, plus another 18% interest. If you use the same logic as is used to calculate the payday loans APR, at the end of the year, the original $1500 loan re-written 4 times the 60% APR = 240%APR. Those of us in the payday business have been incouraged to switch to the small loan license. But as it is written we still can’t compete because of altra low loan origination fees ($15-$30) and a cap of 28% APR, not 28% interest. I don’t mind being the underdog, but the playing field is simply not level.

Business & Media Institute: “Leave it to CBS to attack the legitimate, legal, and useful service”

This article by the Business and Media Institute, ‘CBS Evening News’ ignores borrower responsibility in hit piece on short-term lenders, critiques “Evening News” correspondent Armen Keteyian’s July 28th hit piece and points out that nearly 20 million American households utilize payday lending services to make an emergency car repair, cover a variety of other costs or avoid bounced check fees.

They say that calls requesting comment from Mary Bates (the customer interviewed for the CBS Evening News) on the apparent contradiction were not immediately returned. Bates had previously been quoted as saying, “Payday loans are really convenient and they help people get out of a bind…It’s less of a hassle. I really liked the people and they provided me a great service.”

The Business & Media Institute, a division of the Media Research Center, is nonprofit watchdog organization that strives to bring balance and responsibility to the media.

More CBS video

This bit of video is part of CBS’s “Eye to Eye” feature, exclusive to the web.  This video features Ohio State Representative Chris Widener talking about the payday lending legislation enacted in Ohio.  Notice how Widener continues to cite “a cycle of debt” and “statistics” as justification for the legislation, but never gets specific (especially with the statistics).

Widener also ticks off the different measures the legislature considered for regulating payday loans — a statewide database, a limit on borrowing — measures that would have addressed the core problem of this issue: personal responsibility.  Instead, Widener and the Ohio legislature chose to punish and eliminate an entire industry.

The Payday Pundit’s favorite thing about this interview is the smug look on Widener’s face.  He must be incredibly proud to have elminated 6,000 Ohio jobs.

Truth in lending for microfinancers?

Stung by allegations of charging high interest rates, Microfinancers are considering a “truth-in-lending” type standard to apply across the industry.   From the BusinessWeek story:

In an effort to head off a potential crisis in the fast-expanding microfinance industry, its leaders are adopting global truth-in-lending standards and creating a system for comparing loan terms offered by competing lenders. To manage the effort, a new self-monitoring organization, MicroFinance Transparency, is being set up as the industry’s policeman. The goal is to prevent companies from taking advantage of poor people with high interest rates and misleading credit offers.

The initiative was announced on July 28 at a microcredit conference in Bali by Chuck Waterfield, a professor at Columbia University who spearheaded the initiative, and Nobel Peace Prize winner Muhammad Yunus, who launched the microcredit revolution in Bangladesh 30 years ago with his Grameen Bank. “Microfinance emerged as a struggle against loan sharks, so we don’t want to see new loan sharks created in the name of microcredit,” Yunus tells BusinessWeek.

Unlike payday lenders whose primary customers are America’s middle class, microfinancers lend to the poorest of the poor.  It would seem that truth-in-lending standards should be the minimum starting point for this industry. 

Credit card companies hammered by citizens in comments to the Fed

Astonished at the number of people attending the funeral of detested Hollywood mogul Harry Cohn*, a reporter asked comedian Red Skelton to explain it.   “Give the people what they want, and they’ll come out,” said Skelton.   

Well, the Federal Reserve is apparently giving the people what they want.   The comment period for its proposal to reign in deceptive credit card practices continues to set records.     

* Cohn was also the model for the Jack Woltz character in “The Godfather.”

“Peace & prosperity” or “WWIII”

There was a fairly civilized discussion in the comments section of the CBS Evening News segment with stuff like this:

What’’s funny is that when you type in payday loans above on the search site you get 3 listings for internet payday loan sites. How hypocritical is that for CBS? Looks like they secretely support them and not the other way around. Why not tell my bank that’’s charging me $35.00 in overdraft fees and $5.00 a day until it’’s cleared up that they are predatory? What about that story? In two weeks time that is $70.00 if I only had 1 overdraft. I would rather use the payday loan it’’s cheaper!

This is all the fault of Clinton and the liberals. Remember and vote GOP in November! Vote for peace and prosperity!

—–

I can see you are an idiot. The GOP party is the biggest threat to our national security. They are warmongering, fearmongering fools that want to live off the backs of hard working people. All they have done is start unnecessary wars and destroy the dollar as we know it. Now they want to attack Iran and start WWIII.

Pawning a Rolex

This story out of Missouri discusses the boom in the pawn shop business.   One  pawnshop operator describes customers who live paycheck-to-paycheck, but not at the lower income levels: 

“Our phone traffic has increased probably 10 times what it was a year ago and most of it is people calling, looking for particular items, wanting to know if we have them,” Loftis says.

And across town one specialty pawn shop owner is seeing people open up their safe and selling high-dollar items like Rolex watches to get by.

“Some of my clientele live paycheck to paycheck, but they’re living in $250,000 homes,” Craig Warren of Gold Exchange says. “A guy may need $3,000 to get him through for a week or two, so he’ll pawn his Rolex.”

The Payday Pundit is loath to tell people how to live, BUT,  I advise anyone who needs $3,000 to get through a week to think about cutting expenses.  

Payday lender wants to know, “Who is there for you?”

CFSA member company, Advance America, has launched a new new advertising effort and online contest encouraging people to illustrate how people have helped them in times of need. Marketing Daily reports on the new contest in which consumers are encouraged to nominate, via an Advance America-sponsored microsite www.whoisthereforyou.com, people who have helped them during tough times. The grand prize for the contest, which ends on Oct. 21, is $25,000 each for the nominee and nominator.

Trudy Boyles of Advance America says, “We’re looking for everyday heroes who have helped others through life,” she says.

More loan options? What a concept.

Tim Miller from Center for Consumer Freedom in today’s Fort Myers News Press:

So what if the payday loan business isn’t the most popular or the prettiest niche of the financial services industry. For millions of customers, its availability means that the car gets an urgent repair, a critical check doesn’t bounce, or the electric bill gets paid. Considering the borrowing alternatives, a $15 flat fee for a $100 two-week cash advance doesn’t seem like such a bad deal.

Eliminating a major short-term credit option for financially stressed adults is hardly an act of mercy. We should be helping Americans find more debt management options-not taking them off the table.

As always, Mr. Miller has a way with words.  

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