Posted by ( Chris ) on February 26, 2008 at 6:28 pm

Ken,

Exactly. Usery used to be frowned upon back when morality prevailed.

Posted by ( Jeff ) on February 26, 2008 at 8:50 pm

While I agree that the rates are excessive, it is the choice of the consumer to walk through the doors. If you use the excuse that the poor don’t have an understanding of the fees, then where do you draaw the line? We can’t let a consumer off the hook everytime they sign a contract they don’t understand. I am an educated man that just bought a house. You ever seen all the paperwork in that? I don’t understand it all but I must honor what I entered into. The loan companies explain it pretty well. I have used them. They say we are giving you THIS much and you pay us back THIS much. It’s no simpler than that. The law of supply and demand at work. If you ruin your credit and can’t get a conventional loan, it is your fault. The type of people being loaned the money have a reputation and financial history of not paying bills. That is a fact. The company deserves the right to ensure they make a profit. That is the American way. I wouldn’t have it any other way. If you don’t want to pay those fees, don’t walk in the door. By making them illegal, it not only goes against every principle of the American economic system and free enterprise, it also takes away the only opportunity for those you aim to protect from getting a loan. Why stop there? Close the pawn shops, the high interest auto finance companies so that only high credit scores can purchase a vehicle. At some point, people have to be held accountable for the decisions they make and live with the consequences. Have to grow up some time.

Posted by ( bruceberquist ) on March 29, 2008 at 2:22 am

For those of you who value your freedom to make your own decisions in regard to your finances, and how you pay your bills, please read my Blog, “Pay day loan mis-information”.

There are people, including reputable news writers, who do not fully understand pay day loans, who are spreading mis-information.

Lawmakers, and politicians, are buying into this mis-information.

Now they want to protect us from ourselves.

It is important that we all understand a balance of all of the facts, before decisions are made, that effect something of such good use to so many good people.

Read the Blog as follows:

Pay Day Loan Mis-Information

Category: News and Politics

I recently read a Reuters news article, written by Nick Carey, Mar 23rd, 8:15pm ET, titled, “’Pay day’ loans exacerbate housing crisis”. I would like to clarify that there are some great inaccuracies and bias in this story that really must be pointed out.

I have had extensive experience with pay day loans, and, though I agree that the APR (annual percentage rate) is quite high, and people can get into trouble when they do not use these loans as they are designed to be used, this news report highly exhagerates the cost of a loan.
Read from the article as follows;

“A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center.”

This is not accurate! And there was much more inaccuracy than this in the article.

A pay day loan from a legitimate financial retailer generally costs about $15 for every $100 up to $500. This means that for a loan of $100 for 15 days the charge will be $15, totalling the loan at $115, which must be quoted as an APR of 365%. the actual total pay off for a $300 loan is $345.

In reality it is only a fee that is being paid, not interest. However, government regulations require that it be quoted as interest, as an APR.

And, by the way, I don’t know where the “anti” pay day loan “spin masters” get their math, but the 365% quote is an APR, which means that if you were to pay off and take this amount loan out, over and over again, consecutively over 1 year, your fee would equal that of a 365% APR. It does not compound, or whatever “voodoo” the “spinmasters” would like people to believe.

So it should be clear that pay day loans are strickly meant, and offered, to be used as short term loans, and never on a long term basis.
If a borrower runs into trouble and falls short of being able to pay off the loan, legitimate financial retailers offer, for no additional fee, payment plans with CFSA, and ,in some states, state sponsored plans.
It also should be noted that these loans, and their payments or lack of payments never reflect on the borrowers credit report or history. 

The only way that a short-term loan, a pay day loan, could build up to the absorbitent amount qouted in the news story, is if the loan were to be “rolled over”, which is highly illegal in nearly every state that regulates these loans, so, thus, it would be highly improbable that there would be an average of borrowers that pay such amounts.

Pay day loans are for exactly what they are named. A short term small loan to be paid off by the next pay date of the borrower.

These loans have saved many a borrower, in a temporary financial pinch, to pay some bill(s), from much harsher penalties and costs that are incurred by banks and credit institutions if checks do not clear or payments are late.

The proper use of a pay day loan actually shows a personal and professional level of responsibility when it is used properly.

Yes, people do mis-use these loans, people get into trouble, people borrow beyond their means, and there are less than savory lendors who do not do what is right in order to avoid such disasters for their borrowers.

Pay day lendors must exercise great responsibility to protect borrowers and potential borrowers from becoming victims of borrowing beyond their means. That might even mean turning down a less than able and questionably qualified customer from borrowing.

I am disturbed to also hear lawmakers and politicians who are buying into mis-information and threaten the reasonable management and existence of a very useful and helpful service to many people.

Bruce - Washington

Posted by ( bruceberquist ) on March 31, 2008 at 10:28 am

For the question; “Why do these businesses compete with banks?”

These businesses do not “compete” with banks, though many of them offer other services that may make then “alternatives” to some banking services. They do not offer many services such as checking accounts, savings, long term loans and mortgages, investment products and services, etc..

These businesses do offer an important service, pay day loans, that have saved many of its customers from the pain of bank over-draft fees, and/or charges on late loan payments.

A $5 over-draft in many banks will incur a daily charge of $35 per day until the over-draft is covered. If they were required to quote that fee as an APR (annuual percentage rate) of interest, what would that APR be? Compare that to the short-term fee of a pay day loan.

Yes. In an ideal world we would all plan perfectly, so that we would have the money on hand, everytime any bill came up as due, and there would be no unexpected emergencies. But, this is the real, and not always so ideal, world.

Banks, and bank services, are vitaly important. It is sad that there are organizations out there, that are campaigning and lobbying to abolish pay day loans, and much of their unspoken agenda, and interest in the issue, is that they make profits on the fees that are charged on over-drafts and late loan payments, that pay day loans help good american people to avoid.

Think about it. Think and listen and decide with a balance of the “real” facts, before you rally behind someone who wants to abolish something that does so much good for so many good people.

Posted by ( Bruce Berquist ) on April 23, 2008 at 1:52 pm

To say that people are “Lured” into the industry, as though it were a trap, is obscene. Legitimate pay day loan businesses advertise no differently than any other legitimate business.

And to say that people get bled dry by the industry is actually an impossibility in any form of transaction with a legitimate pay day lender.

Though the fee on a pay day loan must, by government regulations, be quoted as an APR, it really, actually, is a flat fee that is charged, and, with legitimate pay day lenders, it remains that same fee amount whether the loan is paid on time, paid late, or never paid. There is no additional interest or compounded charges.

There may be a one time additional fee, of as musch as $25, for checks that are returned with insufficient funds, just as nearly every other retail establishment also charges.

To say that the industry targets the poor is very highly inaccurate. Pay day lenders are located, and do business, in affluent neighborhoods, middle-class sub-urban neighborhoods, as well as discriptively poor neighborhoods.

I personally know of wealthy clients who have used payday loans in order to make purchases in confidentiallity, such as a gift for their spouse, who might, otherwise, see the transaction in their accounts. And of many middle-class clients who have used payday loans to temporarily cover emergency expenses, such as a surprise car repair, or an unexpected school expense for their child.

All covered by their next payday income for what is really a flat fee charge.

Nobody is ever trapped by the business itself, since no additional fee payment plans, and other payment agreements are always available at no additional cost.

I applaud any and all politicians who choose not to be lobbied, or influenced, by extremists with no open minded ability to allow commonsense solutions, to an agenda, that just requires dialog, management and regulation.

Bruce Berquist
Washington