Car repo men and pawnshops booming in Arkansas and expected to grow in the wake of payday lending stores closing.   From the piece:

People pawn golf clubs, CDs, tools, and a big trader is gold jewelry. At nearly $1,000 an ounce, it’s hitting record levels.You know you can’t go to a bank and get a $25 loan to pay your gas bill,” says Pakis. “We are here for people that don’t necessarily have a credit card. We can always help out people.”

Pakis says with the slow economy and Arkansas payday lenders forced to shut down, that he expects business to double by the end of summer.

 

…Or perhaps you are interested in a homemade bear costume complete with “musty scent.”

The Cleveland Plain Dealer has an interesting look at the pawnbroking business. 

People sometimes confuse pawnbroking and other short-term financial services with payday loans.  While they offer another option for people facing and unexpected and unbudgeted expense – pawnbroking and payday loans are very different services.  Here are some FAQs about payday advances.

The Center for Consumer Freedom posted some more food for thought regarding the payday lending issue on their website.

At a time when so many Americans are facing unprecedented financial difficulties, it seems out of the question to take short-term loan options away from consumers—especially when many of them have few alternatives as it is. But for self-righteous individuals who would prefer to make decisions for all of us, protecting choices (or offering more of them) is a low priority.

…compared to bounced check fees and overdraft protection.  The payday lending industry has been making this point for years, but now economists are catching up.  This article on the blog of the Left-wing magazine Mother Jones discusses research by East Carolina University Professor Marc Anthony Fusaro.   

From the article:

     Fusaro looked at overdraft protection as a form of a short-term loan and found that people who occasionally bounce checks (between 1 and 10 times a year) pay interest rates exceeding 6,000 percent. Chronic bouncers in the study, who make up a small percentage of bank customers, paid more than $3,000 in fees annually for the privilege. The average size of the overdraft was pretty small, between $90 and $300. The most extreme case in the study was one poor soul who had a $3 overdraft outstanding for one day, which resulted in an intereste rate of 260,245 percent, a hefty surcharge for using a debt card for a latte.

According to this piece, people are bringing their gold to pawnshops to get enough money to fill their gas tanks before payday.   From the article:

   “We’ve got people from Williamsburg and different places that have never been in a pawn shop, and they are a little bit nervous coming in until they talk to my husband,” said Epstein.

    Mercury Pawn is also seeing more people come in because of gas prices.

Last sentence of the article mentions payday lending as another business that’s seeing a pickup in customers.    The Payday Pundit keeps seeing this assertion in the media, but there’s really been no evidence of it.  

Just a few comments on this Associated Press story about a new “payday loan alternative” in New Hampshire.

The article fails to mention a few key points:

1- St. Mary’s Bank is  a credit union, not a bank

2- The MyPay product is offered in two loan amounts: $250 and $500.  There is an 18% APR, along with a $15 fee for the $250 loan and a $25 fee for a $500 loan. 

So, yes, it is a bit cheaper than a traditional payday loan, but keep in mind that credit unions are exempt from federal and state income taxes due to their status as not-for-profit financial institutions. They do not have to pursue a profit. And the majority of Americans do not have access to a credit union, as their membership is restricted to defined segments of the population.

We welcome St. Mary’s Bank into the payday lending market and believe competition is good for our customers. But while credit unions can provide another choice for consumers, they cannot be considered a replacement for payday lenders in New Hampshire.

The Payday Pundit loved this story.  One 19-year old bank customer is highighted: 

He accidentally overstepped his overdraft in January by £25 and he calculates the penalties and interest so far incurred from being pushed further and further into debt now total £292.66.

He said: ‘I have paid the fees back twice, once borrowing money from my mother as well as using my full wage to pay it back the following month. This has left me penniless and yet the charges still keep coming.

The High Court will be ruling soon on whether overdraft protection fees constitute violations under Britain’s Fair Trade laws.   

The payday lending industry exists in part because consumers are trying to avoid bounced check fees and costly overdraft protection charges.    

BTW, the average overdraft protection fee in the United Kingdom is $57. 

The Black Hills Credit Union is offering an “alternative” to payday loans.  According to this article qualification for this ervice is ”not based on credit score, debt ratio or discretionary income.”   Isn’t this a line of attack critics such as the Center for Responsible Lending level at payday lenders?        

Great post by Wondering Heretic if you have a few minutes to read. A few excerpts: 

In short, the demand for high interest loans for high credit risk people will always be there. The issue is how will this demand be met? It can be through the government controlled, legally restricted, and relatively gentler auspices of Payday Lenders, or it can come from another less official source.

My fear is not so much as to what will happen to the Payday Lenders as much as to what will replace them. Like my father’s day of “four for five” someone will be providing the funds to the people who perceive that they need them. If the poor can no longer have access to official sources then the risk is that they will entangle them in “unofficial” ones. By eliminating legally controlled and restricted sources you may very subject them to uncontrolled, unrestricted, and illegal ones.

Edmund Burke was only partly correct. Sometimes all that is necessary for the triumph of evil is for good men to do the wrong thing, or even the right thing the wrong way or at the wrong time.

According to Bankrate.com, the answer is ChexSystems, a company which holds your bounced check information for five years, providing data to other banks and lenders who asses whether you’re potentially a ”valued customer or a liability.”  Eighty percent of financial institutions use this service.

Of course, avoiding bounced checks is the number one reason consumers take out payday loans.