You’ve seen them I’m sure. Storefronts in largely low-income neighborhoods with flashing signs saying get quick cash or something similar. They’re companies that provide a one-time “quick fix” consumer loan to those short on cash. They’re called Payday lenders and they often are the only financial entities around in otherwise financial deserts of inner cities. Because of this monopoly, they exploit low-income borrowers and manipulate the law. Call them loan sharks.
One of the big problems with Payday lending corporations is that they’re not required to determine whether borrowers can actually afford the loan. Most of the time, they can’t. There’s no credit check. Seventy percent of Payday borrowers end up taking out a second loan. About 20% of borrowers end up taking out ten or more loans — caught in a debt trap and racking up interest and fees on top of each other. Annual percentage rates (or APR’s) can end up over 300%. This is a major scam.
The Ohio Public Interest Research Group (PIRG) issued a report this week, which analyzed close to 10,000 recent complaints made to the Consumer Financial Protection Bureau (CFPB), the federal agency responsible for regulating Payday lending corporations.
The PIRG researchers found that 91 percent complaints involved aggressive debt-collection practices, bank account closures, and/or long-term cycles of debt.
The PIRG report also found that about 15 corporations accounted for more than half the complaints. The biggest offenders are doing business under the names of CashNetUSA, NetCredit, Check ‘n Go, and ACE Cash Express.
Ohio voters approved tougher standards for payday lending in 2008, but the Payday loan shark corporations used loopholes to work around them. They still do.
There are proposed rules being considered by the CFPB that would require Payday lenders to determine if borrowers can afford the loan. The CFPB needs to hear from us. The deadline for comments is October 7. Now is the time to act to stop the targeting of low income communities and communities of color. The current head of the CFPB is Richard Cordray, former Ohio Attorney General.
The Payday corporate crowd is doing all they can lobby-wise to keep their exploitative scam of low-income people going. It’s up to us to make sure the CFPB hears loud and clear that we need to stop the exploitative debt trap once and for all.
Go to http://stopthedebttrapohio.com and weigh in. Sign your name as an Ohioan. And spread the word.