Consumerism is American. Free market capitalism and payday loans are all part of necessary competition, despite what critics would have you believe. (Photo: flickr.com)

If media and banking industry critics of payday lending are to be believed, payday loan outlets are perched in the reeds, muscles coiled in anticipation of springing upon unsuspecting consumers. “Predatory lending” is the fallback term such misinformed critics use, under the assumption that people who use payday loans are tricked or somehow lured into doing so. Yet ample evidence exists that indicates that payday loan customers are educated and take time to consider their options before choosing the short term loan product.

Understand Who Uses Payday Loans

Edward Lawrence and Gregory Elliehausen studied who uses payday loans and why in their April 2008 Contemporary Economic Policy article “A Comparative Analysis of Payday Loan Customers.” Using a national survey that takes into account numerous payday loan outlets belonging to industry trade association the Community Financial Services Association (CFSA), the authors reach beyond the veil of anecdotal evidence as they interview 427 payday loan customers from the survey. Rather than finding an uneducated, unsophisticated group that is being victimized against their will or better judgment, Lawrence and Elliehausen found that payday loan customers consider their decisions carefully and weigh the cost of payday loans against other costs both monetary and environmental.

Consumers, Consumption and Debt Burden

Consumer credit fills a definite need, particularly for segments of society without a great deal of liquid assets at their easy disposal and a significant debt burden. Building upon Juster and Shay’s 1964 study “Consumer Sensitivity to Finance Rates: An Empirical and Analytical Investigation,” where consumer credit is seen to be used on household durable goods, and multiple studies that suggest that such a method is financially feasible when the rate of return is high, Lawrence and Elliehausen point toward a model where high interest payday lending may be optimal for certain consumers. The conditions under which the authors see this would be the case are “relatively high-return investment opportunities, low current income and strong preferences for current consumption.”

Yes, We Live in a Consumer Culture

Americans see it as their right (and their curse) to “keep up with the Joneses.” When this behavior is left unchecked, personal debt can spiral out of control. Thus, when consumers look to short term loans like payday loans to handle financial shocks, they do so in large part because they do not have the liquid assets available to handle their debt obligations in lump sums. Creditors know this, so they tend to limit the amount of credit they extend so as to protect themselves from default. Unsecured personal loans are available from payday lenders to make up the difference. They are available at a cost that the authors find consumers are more willing to swallow than more expensive or socially taboo alternatives.

The Rise of Rationed Borrowers

The authors refer to the Juster and Shay study in stating that borrowers constrained by their debt loads are “rationed” borrowers. Juster and Shay theorize that rationed borrowers are “in early family life-cycle stages where rates of return on household investments would be high.” Their income would be low to moderate, which would explain the small amount of liquid assets available. Furthermore, their demand for consumer credit would be connected less to interest rates and more to the general lack of standard credit available.

That’s the way Juster and Shay saw it in 1964, 45 years ago. Things have changed a great deal since then. Creditors have a greater technical facility for assessing and pricing risk, say Lawrence and Elliehausen. The requirements for equity have lessened and the time for short term loans to reach maturity have lengthened. Unsecured credit through bank-issued credit cards has also become more readily available. There is a “subprime credit card market” for today’s rationed borrowers, but there are other alternatives that do not deal so heavily in the constant spiral of revolving debt. Payday loans have been a prime alternative for rationed borrowers.

NOT Preying Upon the Elderly

Some critics of payday loans claim the industry preys upon the elderly. However, numerous recent studies indicate that young and middle-aged consumers have contributed to an increasing demand for short term loans. Their drives are somewhat different, as Lawrence and Elliehausen’s findings show. For the young, their demand for payday loans has been predicated on how quickly they can pay off their short term loans (seven to 20 days is standard) and hence regiment their budget, whereas middle-aged  consumers’ demand is more in tune with obtaining better interest rates.

Budgetary Discipline

This sense of maintaining a budget in the face of environmental pressures resonates through various other studies. Katona’s “Psychological Economics” (1975) indicates that consumers “may be reluctant to increase credit card debt because they fear that they will not have the discipline to make payments on the additional debt.”In this case, Lawrence and Elliehausen hypothesize that consumer use of payday loans via a standard contract may be expensive in a traditional sense, but if the alternative is increased vulnerability to higher debt or even an inability to access credit, the short term loans are preferable in the long run.

Survey Says

Payday loan customers surveyed by Lawrence and Elliehausen tend to break many of the stereotypical notions spread by critics of the industry. They are not in fact poor; just over half had family incomes between $25,000 and $49,999. Considering that having an active checking account is a requirement for obtaining a payday loan, unbanked households (generally lower income) are not being exploited by such short term loans. In terms of age, two-thirds were under 45 years old, with more than one-third under 35. Only 10 percent were 55 or older, so clearly the elderly is not being targeted. Family situations indicated more than half were married or living with a partner, and 65 percent of respondents had children under 18 years of age living in the household. These are young families with debt loads who are attempting to deal with financial shocks as best they can. Now that America is in a recession, I’m sure that if Lawrence and Elliehausen conducted their survey today, the numbers would continue to support this idea.

Do They Have Other Options?

The survey indicated that a whopping 91.6 percent of payday loan customers do rely on other types of consumer credit at times. However, considering the finding that payday loan customers are less likely to use revolving credit like credit cards, one would think that they find an advantage in using the more regimented payday loan model. I would offer that it is precisely that budgetary discipline discussed earlier that makes payday loans more appealing for these rationed borrowers.

Of course, having other credit options tends to go hand-in-hand with the potential for a greater debt burden. As such, the authors’ survey found that 73 percent of payday loan customers had been turned down or limited in their ability to secure other types of loans over the past five years. Payday loans become a necessity during financial emergencies if other options are limited. In fact, two-thirds of respondents claimed they used payday loans due to unforeseen financial events.

Making Informed Decisions

Lawrence and Elliehausen found that respondents to the payday loan survey tended to follow cognitive models suggested in other consumer credit studies. Specifically, they go through a process where they recognize need, gather details, consider options, decide and then evaluate how it went in the aftermath. As the majority of consumers in the survey appeared educated (the majority were high school graduates or had college experience), it would stand to reason that payday loan customers tend to display cognitive ability and efficiency. In the case of details like APRs and finance charges, greater education tended to equate to greater awareness (where such factors were considered important in the decision-making process).

Young Families Who Consider Options Carefully

Lawrence and Elliehausen’s findings speak to the financial realities facing many American families. They’re just starting out, their wages are not yet high and they don’t have many liquid assets lying around for a rainy day. Used in a non-habitual fashion, payday loans help absorb financial shocks during times of financial difficulty. They give consumers “a little control over their financial affairs they otherwise would not have,” write the authors. Is it any wonder then that customer attitudes toward payday lending were positive in the survey? There is peace of mind in being able to handle one’s own affairs. Since the majority of those surveyed did not show signs that they were using payday loans beyond the fashion for which they were intended, why is it that the government should be so gung-ho to step in with heavy regulation and taxation? By stymieing competition in a free market economy and restricting payday loan availability, aren’t they harming both consumers in need and their own capitalist system?

Do military loans put personnel on a collision course with financial catastrophe? (Photo: flickr.com)

Payday loans come in a variety of packages for consumers, and that includes those who are active members of the military. They’re called military loans in that instance, and they can be quite useful to military personnel who have had difficulty obtaining loans from banks and credit unions. While a variety of underwriting decisions could factor into such rejection, the fact that many military members who borrow are young and do not have established credit histories would appear to be the most obvious.

Military Loans are Highly Regulated

In October of 2007, the Department of Defense imposed a 36 percent APR cap on military loans to personnel and their family members. Considering that young military families must pick up and move frequently and are often on the lower end of the military pay scale, financial shocks do occur. Spending habits are clearly an important factor in whether a military family faces financial calamity, a factor that can lead to a need for military loans should the family budget fail to stretch between paychecks.

Do Military Loans Hamper Military Readiness?

That’s the question the study “In Harm’s Way? Payday Loan Access and Military Personnel Performance” by Scott Carrell of UC Davis and Jonathan Zinman of Dartmouth College and the Federal Reserve Bank of Philadelphia poses. Their study was conducted before the implementation of the 36 percent APR cap, between 1996 and 2007. U.S. Air Force airmen were the focus, but the authors claim there is no obvious reason to suggest that conditions would be appreciably different for other service men and women.

The authors suggest that the availability of military loans before the 36 percent cap correlated to a decline in military readiness of personnel, but it seems to this reviewer that the number of variables is much too great to affix the blame solely upon military loan businesses. There are so many possible psychological and educational variables in play that the mere presence of legitimate businesses within a military community (or online) couldn’t possibly be the sole cause of financial distress.

Access to High-Interest Debt: “Inconclusive” Affect on Borrower Behavior

Carrell and Zinman preface their work with that admission. So does that mean that we should take their conclusions as mere speculation? I can speculate regarding whether the presence of ice cream in a community contributes to dairy allergies, but that doesn’t mean it is unequivocally true.

In fact, analysis exists which indicates that the presence of military loans and related payday loans has a positive impact upon military personnel and their families.  On average, says Adair Morse in his 2007 study “Payday Lenders: Heroes or Villains?” and Bart Wilson, et al in the 2008 study “An Experimental Analysis of the Demand for Payday Loans,” military loans help personnel handle financial shocks. Dean Karlan and Jonathan Zinman found in 2008 with “Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts” that access to payday loans contributes to job retention. And it should also be noted that the 2008 Federal Reserve Study “Payday Holiday: How Households Fare After Payday Credit Bans” by Donald Morgan and Michael Strain indicates that families (military or otherwise) who experienced financial distress were able to obtain greater budget liquidity to alleviate the distress thanks to military loans and payday loans.

So Where’s the Connection Between Military Loans and Lack of Military Readiness?

Carrell and Zinman claim to have found “significant average declines in overall job performance and retention and significant increases in severely poor readiness,” which they attribute to military loans. Yet they say that “the welfare implications for military members are less clear-cut,” which indicates to me that this is more speculation than solid scientific research.

The study authors reference the Pentagon’s belief that military loans “cause financial distress and related distractions.” At the same time, however, they admit that another possible effect of access to military loans is that personnel and families will experience greater financial liquidity, which in theory enables them to invest in outside areas (greater opportunity in the private sector) that could make re-enlistment less necessary for personnel. That could then be a technically positive factor that skews the results of Carrell and Zinman’s rather negative study.

But Here are Their Findings

The authors suggest that airmen become “significantly” less eligible to re-enlist (by 1.1 percent). They find that military loans also contribute to poor readiness (more unfavorable information files present for personnel in areas where military payday loans are available). But they undercut their findings with the admission (once again) that “our data do not permit sharp tests of the welfare implications for military members.”

It seems likely that the youth and inexperience (as well as the transitory lifestyle) young airmen and their families are forced to live would have a greater effect on the financial burdens they face and their spending habits. Using military loans could simply be a means to an end for dealing with the shocks. As the military provides financial education to their members and their families – particularly since the 36 percent APR cap – using military loans irresponsibly should be a less likely occurrence.

We Aren’t Talking About Large Loans Here

A standard military loan amounts to anywhere from $100 to $300 in the authors’ study. The market rate was $15 per $100 loaned (a common rate found now), so the final cost would range from $115 to $345. Higher rates are charged at some lenders, however. But the more expensive substitute – overdraft protection, according to multiple sources – can prove to be an even greater financial burden. The APR charged can be hundreds of percentage points higher, depending upon the bank.

Military Loans and Being Fat

I found this interesting. One of the factors Carrell and Zinman found could appear on an airman’s profile that indicates lack of military readiness is weight problems. According to the U.S. Air Force, personnel must be physically fit enough to perform their duties. Among their military loan sample, the authors found that as much as 3.3 percent were enrolled in a Weight Management Program (WMP). This varies depending upon the length of service for personnel (first, second or third term; 3.3 percent came from the second term of enlistment).

Does this mean that military loans make airmen unfit because it makes them fat? I find that to be a laughable assertion. Education about diet and exercise correlate greatly to personal weight in every study I’ve seen. Not having access to more money via military loans or otherwise seems an unlikely correlation. Fast food consumption tends to be greatest among those with less money and overall education, which leads me to believe that education would have a similar impact upon one’s financial decisions (both health and money choices can be impulsive, but education lessens this likelihood).

It’s the State of Their Communities

In general, Carrell and Zinman find that Air Force bases in more distressed areas (where unemployment is greater) tend to be more prone toward dependence upon consumer credit like military loans. Areas with more positive employment numbers show a lesser dependence. This could link toward greater financial experience and education in those areas, which seems obvious to consider. Yet the authors tend to gloss over this potentiality.

Military Loans are a Tool. The User is the One Responsible

It’s impossible to get around the fact that Carrell and Zinman admit that “the social welfare implications of our results are less clear-cut.” They claim they support the Pentagon’s findings that military loans and payday loans damage the quality of life for military members and their families, but factors of education, psychology and the rigors of military life itself deserve greater study. Are these factors more accurate determiners of whether military families face financial distress? It seems that more study in these areas is called for.

Destroying the payday loans industry creates problems and solves nothing. Balance is needed in legislation. (Photo: wikipedia.org)

Even if you’ve never been a customer of a payday loan business, you’ve likely seen or heard about the product. You probably also know that payday loan businesses are fairly easy to find in both the brick-and-mortar world and in cyberspace. With such a proliferation, it seems obvious that there is a demand for such consumer loans. Yet for a product that millions of consumers use each year, it’s interesting that the entirely legal payday loan industry has been affixed with such a negative reputation.

Throwing Stones

The most common allegation levied against the payday lending industry is that it constitutes predatory lending, exploiting helpless consumers with high rates and other loan shark tactics. On their behalf, those who offer payday loans assert that the rates charged are appropriate to protect against risk, yet much less damaging than what consumers can encounter in fees if they don’t pay their bills or have their utilities shut off. Unfortunately, there is relatively little objective analysis that looks beyond the rhetoric of both sides of the payday lending issue. Critics adopt what they consider to be a moral high ground where they use “payday loans” and “usury” in the same sentence, while lenders defend their practice by illustrating that customers are made aware of costs before a contract is signed and by claiming that current rates are necessary in light of operating costs.

Let’s Take a Balanced Look at the Stats, Shall We?

That’s exactly what Aaron Gold does in his New York University honors thesis “Payday Lending: Grounding the Policy Debate Through Economic Analysis.” His study compares some key metrics between payday lenders (five of the largest chains, representing 25 percent of U.S. stores) and a sampling of “traditional” lenders such as banks and credit unions. In a nutshell, Gold finds that high operating expense does seem to justify the cost of payday loans. While data supports the notion that payday lenders are more profitable than traditional lenders, their profits in relation to their “break even” point aren’t as outrageous as overheated critics claim.

The Social Forces behind Payday Lending

While people from all walks of life have had the occasion to use payday loan services, averages definitely point in the direction of an upper-middle to lower class demographic. Gold cites the M.S. Barr article “Banking the Poor” in the Yale Journal on Regulation. Barr suggests that an increasing number of Americans are “under-banked” (Barr, 2004, p. 2). “Real or perceived costs and fees of maintaining traditional banking services,” suggests Barr, are simply too much of a hurdle for scores of people to clear. Considering the shenanigans of financial institutions that steered America toward the current recession, such skepticism is no surprise. Douglas McGray writes in an article entitled “Check Cashers, Redeemed” that lower income consumers and (anecdotally) some segments of immigrant communities tend to disdain the system of traditional banking and credit. Furthermore, he alludes to public relations efforts made by payday lenders in their communities (such as employing local, multi-lingual people). Thus, payday loan stores serve as comfortable, convenient one-stop shopping for those in need of quick cash during an emergency.

Payday Loans Are For Consumers with Steady Income

It is simply untrue that payday loan companies prey upon people who don’t have the money to repay. Only those with a verified steady income are eligible, a safety measure for both the consumer and the lender. An analogy Huckstep uses in his important study “Payday Lending: Do Outrageous Prices Necessarily Mean Outrageous Profits?” is that payday loans are like a financial taxi: “Expensive for long trips, but perfectly viable for short distances” (Huckstep, 2007, p. 207). Used properly, payday loans can save consumers a great deal of money over more catastrophic alternatives. This is a fact that reputable payday lending businesses stress to consumers through their literature and service counseling.

But Are Payday Loans Too Expensive?

That’s what critics say, and the key defensive position has been that high risk justifies the price. Gold points to the 2005 FDIC study by Flannery and Samolyk “Payday Lending: Do the Costs Justify the Price?” in support of the defense, but Huckstep counters that “while loan losses may be high… that seems to be a trait of the lending industry generally, rather than a unique trait of payday lending institutions” (Huckstep, 2007, p. 230). Looking at said charge-off rates, Gold finds the ratios (dividing yearly charge-offs by the amount of originated loans during that period) between payday lenders and traditional lenders to be rather similar, and very much in keeping with overall Fed averages. In fact, the average for payday loan default is shown in Huckstep’s study to be below those of credit cards. This suggests that consumers are indeed able to handle their payday loans when compared with other kinds of consumer lending.

Do Payday Lenders Reap “Obscene” Profits?

Overall, multiple sources confirm the truth that payday lenders have enjoyed greater profits in recent years than traditional lenders based upon similar products. But Gold would have us understand that from 2006 to 2008, the profit margin above the “break even” point for the major payday loan companies decreased dramatically. There are numerous reasons for this, but Gold intimates that a lack of growth opportunities within the payday lending industry may have something to do with it. Whether this is because the industry has become overgrown and needs pruning or overzealous regulation has hamstrung businesses in too many states is debatable.

From the standpoint of the numbers, loan volume is considered to be the key to payday loan store profitability (rather than exorbitant rates). Growth and competition have a definite impact upon loan volume on a per store basis. Gold believes that consumers are attracted to payday loan locations primarily because of convenience, so expansion of store locations and operating hours are necessary to compete. However, venturing beyond a saturation point may actually decrease profits.

Good Return on Assets and Equity

Payday loan business, according to Gold’s findings, produce a greater return on assets (ROA; the ratio of operating income to average assets), which indicates that they are more efficient at what they do than banks and credit unions that offer similar products. Considering that payday loan companies tend to have a relatively small number of physical assets when compared with big traditional lenders, the payday lenders experience much less loan turnover and require much less operating capital in order to produce positive returns.

Does this mean that shareholders of payday loan companies are making a killing? Relative to traditional lenders, the equity tale of the tape says no. Gold finds that from 2004 through 2006, payday loans originators and traditional lenders were basically dead even. By 2008, however, the subprime mortgage crisis sent traditional lenders plummeting. Payday lenders readily took up the slack of consumer demand and posted a much more positive return on equity.

Scale Down, Payday Lenders?

Gold appears to lean toward the idea that if “store density is a function of price, then a reduction in density would increase loan volume and profit at remaining stores.” In such an instance, payday lenders could conceivably charge less and still collect a decent profit. A reduction in competition would then help consumers.

Payday loans could continue to satisfy consumer demand, provided the constant attack mentality of legislators (who no doubt receive sizable campaign contributions from traditional lenders). Some regulation is beneficial (since there are lenders with room in their profit margins to decrease price), but a 50 to 75 percent reduction in APR will only serve to put legal businesses down and increase unemployment. Cooler heads must prevail. As Gold puts it,

For real progress to be made toward finding an equilibrium that works for all involved in the payday debate, interested parties need to move away from inflammatory rhetoric and legislation that views the industry in binary terms. They must move toward defining acceptable interest rates and profit margins and take cautioned steps to satisfy the credit demand in an economically sustainable way.

Follow the Numbers

In America’s recessionary economy, sustainability is a highly desirable goal. Payday loans are here to stay. When will legislators admit that and work toward economic harmony?

If you could use Payday Loans, please apply here

Short Term Loans Online

We are going to share a real life story of a family who avoided additional hardship after being taken advantage of by a bank, thanks to short  term loans online. Of course we have to change the names of the people who benefited from the online short term loans for privacy reasons. Please read the following story of the Joneses and their experience with big banks and installment loans for people with bad credit.

Economic hardships can be prevented with short term loans

The “Jones Family” got more than one short term loan online in order to squeak by in this harsh economy. Mr. Jones was having trouble making sure that he kept track of all the debit card transactions between himself and his wife. Add automatic deductions to the account and internet purchases and Mr. Jones had a receipt for disaster.

Big bank fees cause big shock to the budget

Mr. Jones had no idea that the big bad bank was going to reorder debits and other deductions to the account in a very strange fashion. After planning a trip for his family for several months, everything seemed to be in place. The Jones family had a great time and had not a clue what was about to happen to them financially. Their budget was going to undergo a radical change without their knowledge or permission.

Fun vacation ruined by bank fees

After a great week of vacation, Mr. Jones finally was able to get online and check the family bank account. Shockingly the bank was claiming they were overdrafted by almost $1,000 dollars. Mr. Jones had set up automatic overdraft protection with a secured savings account credit card. There should not have been 10 overdraft fees charged to the account. It was going to take more than one short term loan online to get the Jones out of this budget crisis.

Read the bank’s fine print

Upon close examination of the banking record, it was revealed that there should have been enough cash in the secured credit card account to cover the overdrafts. There was approximately 15 debit charges to the account for various vacation expenses. There was the addition of an early debit for auto insurance to the account for approximately $200. This brings us to the scandalous part of the story.

Bank reordered debits to create unnecessary overdrafts

The bank reordered all the small debits for the vacation that were in “pending” status and put the larger insurance debit first ahead of the others. This was strange since the insurance debit actually accured after all the small debits in the account. Interestingly enough, the bank reordered the debits to create 10 overdrafts instead of just one. So, to borrow about $100 or so, the bank charged Mr. Jones $350. To say the least, the Jones were outraged.

Overdraft protection ignored by bank

It is bad enough when the bank did not take the money out of the overdraft protection account to cover the insurance payment, but to reorder all the debits for the vacation in order to profit to the tune of $350, that is simply highway robbery. The Jones were not only shocked but extremely upset. Being that the bank would not have any mercy on the Jones, they were forced to obtain short term loans online to make ends-meat while they paid off this outrageous debt.

Banks routinely target families

This is a common tragedy in the United States today. Big banks and financial institutions are taking advantage of working families. They pay the media big bucks to villainize short term loans online but they charge people in excess of 30,000% APR and call it a fee. Short term loans online are definitely a far cheaper alternative than overdraft fees.

Learn from the Jones Family mistakes

If you are like the Joneses you may want to keep better track of your online debit transactions and possibly get a short term loan online before you go on your vacation and pay for everything with cash or at least make sure you have extra money in your bank account. That would have saved the Joneses several hundred dollars and prevented massive headache and anxiety.

Get Your Short Term Loan Online Now!

If you don’t need a short term loan online today you may need one in the future. Please save this page in your bookmarks to come back later. If you need a down payment assistance loan to purchase a vehicle, you should check out VehicleMicroFinancing.com.

That’s exactly what Rock Hill, South Carolina’s The Herald newspaper is doing when it comes to their payday loans reporting. Their staff opine that the recent bill that passed the S.C. House is “toothless” and does not protect consumers from supposedly “predatory” lenders. Of course, they would be on to something if not for the fact that pay day loans aren’t chewy (they go down like a smooth custard) and lenders are paid back on time by their customers about 90 percent of the time. Where’s the predation, the carnage? It isn’t there.

Rub ‘em out, yeah, see…

Through clenched teeth (cheeks?), The Herald describes in mock horror what the state House passed:

That bill limited borrowers to one loan at a time and required a seven-day cooling-off period between loans. More significantly, it capped the amount of a loan at 25 percent of the borrower’s income or a maximum of $500. And it required the State Board of Financial Institutions to keep a database of payday loans to prevent borrowers from shopping for loans from one payday lender to another… The House bill would limit borrowers to one loan at a time and establish a database to track loans. But it places no cap on interest rates, and it would double the amount of money a consumer could borrow — from $300 to $600.

What do they suggest could clean up this inexcusable exercise in consumer convenience and financial utility? Because it has to be stopped, right? Their rallying cry from climates unknown is that South Carolina senators could cap the interest rates loan until payday companies charge. That will harm the population just fine, yeah, ya see?

It’s time for the arts!

According to The Herald, the payday loans industry “paints” a portrait where consumers rely upon them in emergency cash situations. That’s horrible! Is it true, momma, that they also trap little kids like me in a big, bad cycle of debt? No? Oh good, I was worried there. I feel better now that you tell me it’s only a fairy tale.

But the Center for Responsible Lending is NOT a fairy tale. They are very real and very much responsible (through close association) for the recession that has nearly buried America. The Herald, bless their little hearts, they think citing anything from the Center For Responsible Lending constitutes a credible source! Let’s say it for those who missed the commercial last time: payday loans are not annual loans and they DO NOT bear 391 percent annual interest. They are typically two-week loans that charge $15-$25 per $100 loaned. That’s a 15 to 25 percent fee – not 391 percent annual interest.

Lobbying marches on; it’s The Herald that’s greasy

The payday loans industry, according to The Herald, “helped grease the way for the House bill with nearly $300,000 for lobbyists and political contributions.” Lobbying is salesmanship. Everybody does it, or if they don’t, they should. When it comes to political causes (regardless of what side of an issue draws you), money changes hands. So long as the playing field is level, why is that wrong? Lobbying is the American way. Be careful on the way out, Herald. Don’t slip in your own grease and don’t let the door hit you…

Payday loans may be on their way out in New Hampshire, and while a new personal credit line product may step in to fill the gap for consumers who genuinely need the product, it may or may not receive approval from the FDIC. This absence of competition will hurt consumers.

A recent study by East Carolina University economist Mark A. Fusaro showed that regular checking overdraft is ridiculously expensive

A person who has a $3 overdraft that is outstanding for one day pays an implicit interest rate of 260,245 percent.

Interestingly, banks play an important part in the creation of payday loans. The Bank of Italy opened in San Francisco to serve those who went unserved by larger banks. Ironically, this upstart company went on to become Bank of America, one of many megabanks that oppose to competition no fax payday loan companies offer them.

This is why consumers turn to payday loans

Since banks no longer offer small-scale consumer loans – let’s say $100 or $200 to prop up your budget during a cash emergency before payday – payday loan companies have provided the service. As they have been successful in this endeavor – Kennedy notes the recent Community Financial Service Association (CFSA) estimate that there are about 22,000 payday loan stores in the U.S. – banks have been keen to step back in and reclaim the business that they once believed wasn’t “good for business.”

The impact of legislation catering to banks’ desires for profit will be devastating. Payday loan companies will be forced to close once unreasonable rate caps are in place. People will lose jobs, consumers will look to other less-regulated sources for short-term cash assistance and the economy as a whole will suffer thanks to a lack of competition in the market. Banks will then have no incentive to offer better products or curb extortionist overdraft fees.

The Federal Reserve is on the side of payday loans

Is not the Federal Reserve a national money authority in America? They have released reports that not only show that no fax payday loans fail to meet the definition of “predatory lending,” but that when states ban payday loans as New Hampshire is headed toward, there are mostly negative effects. Studies from academia like this further corroborate this point.

Ms. Kennedy’s ideas could be very effective at addressing this problem. First, she suggests that exorbitant fees be curbed. She believes that banks should return to an old practice where there was a minimum dollar amount necessary to trigger overdraft fees. It was not uncommon that if a customer overdrafted less than $15, fees would not be charged. In addition, she believes New Hampshire offer more affordable health care and give raises that keep pace with inflation. She also feels that making basic financial life skills a part of regular school curriculum will help immensely. Payday loans aren’t the problem, but the competition they afford is part of the solution.

Soon after the New Jersey legislature passed a tough law aimed at controlling predatory lending, State Sens. John Adler (D., Camden) and Gerald Cardinale (R., Bergen) teamed up to sponsor a bill that weakened it.

Your Payday Loans News Source Quoted With Edits From: Predatory lending is an issue in N.J.

The Saga Continues

No Good Deed goes unpunished

There has been a lot of information in the news lately regarding the payday loan industry and the accusation laid against them. The opponents of the industry have spread myths and false truths that have hurt the credibility of this industry as a legit and helpful resource that thousands of Americans use and take advantage of on a daily basis.

So vigilant are these opponents that they are now even beginning to lay false accusations against it’s defenders as well.

No Good Deed Goes Unpunished

This article is a perfect example enforcing the fact that imposing government regulation on the free enterprise establishment will only complicates matters.

State Senator John Adler and Gerald Cardinale teamed up to sponsor a bill that tweaked or weakened the NJ law against payday loans in order to let credit flow more easily to buyers.

No Good Deed Goes Unpunished

Now, these two men have been feeling the punch of negative publicity as opponents target them as supporters of predatory lending.

It really has got to stop! If credit can’t flow to buyers, we will only be speeding up the process of the economic down turn that we are now in. Collectively we need to be doing all that we can to jump start the economy not suppress it even if that means taking out payday loans so we can have extra cash.

(AP:COLUMBUS, Ohio) Democratic candidates in two high-profile congressional races in Ohio are pointing fingers over the mortgage crisis.

Your Payday Loans News Source Quoted With Edits From: Ohio candidates focus on predatory lending (INO News)

The Blame Game

If you’re a Republican, the country’s problems are no doubt caused by the Democrats. If you’re a Democrat, the country’s problems are certainly the fault of the Republicans. It doesn’t matter what the issue is, the Democratic and Republican parties tend to point fingers at the opposing party for current political problems. The same is true in Ohio, where the Democratic candidates of two crucial congressional races are blaming their Republican opponents for failing to put an end to predatory lending.

Beware of the predators

A Difference of Opinion

Predatory lending is frowned upon by both parties. However, the Democrats want to eliminate payday loans entirely, while Republicans want to maintain the people’s right to financial freedom. So in this case, the Republicans and Democrats agree that predatory lenders should be reined in, but their opinions differ on how much involvement the government should have in people’s personal finances.

Republicans and Democrats will continue to blame each other for the nation’s problems because they will never see eye-to-eye on all the issues even when it comes to payday loans.

Congress will pass legislation next year that will make Wall Street financiers civilly liable for funding predatory and reckless mortgage loans, predicted Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.

Your Instant Payday Loans News Source Quoted With Edits From: A bill to make Wall Street accountable for loans urged (Seattle Post-Intelligencer)

Assignee Liability and Predatory Lending

This article raises the issue regarding “Assignee liability”. Assignee liability is the term used to hold individuals responsible for holding or buying a predatory loan. This follows in the wake of this years financial crisis and if implemented will help prevent a further one from happening.

What is Predatory Lending and Predatory Loans?

Predatory Lending although not clearly defined by legal law, it’s practices are. Wikepedia best defines predatory lending as quoted below:

“the practice of a lender deceptively convincing borrowers to agree to unfair and abusive loan terms, or systematically violating those terms in ways that make it difficult for the borrower to defend against.”

Although, a legal agreement is formed and signed between two parties of a predatory loan, it’s the predatory lender’s deception in taking advantage of a less informed borrower that terms a loan as predatory.

Why the need for Assignee liability

Can Assignee Liability Tame the Bull? Or will everyone need Instant Payday Loans?

The financial crisis that we are currently enduring was largely caused in part by Wall Street’s aggressive marketing of mortgage backed securities. These securities as the article states, were each made up of thousands of high risk sub prime and nontraditional loans. This ultimately led to the expansion of high risk predatory lending followed by the pandemic of foreclosure and defaulted loans that we have seen sweep the country.

Assignee liability will bring accountability to everyone including wall street in regards to high risk predatory loans.

What next and what to watch for…

If there is anything good that has come out of this crisis, assignee liability seems to be one of them. Until the laws are properly defined and the written we won’t be able to see just how much will be affected by it’s implementation. We want to be careful as not to invite anymore government regulation into our life as necessary yet ensure our own protection from such practices as well.

This article was brought to you by your Instant Payday Loans News Source

If you saw 60 minutes last week you might have been just as surprised as I was to learn that Treasury Secretary Henry Paulson had ordered Bank of America and several other banks to take quick payday loans even though Bank of America said that they did not need the money. I find two problems with this which are equally troubling.

Is our government becoming socialistic?

First, since when was the government able to order free enterprise working within the bounds of the law to sell out preferred shares to the government? This sounds a little like socialism to me.

Using taxpayer dollars?

Secondly, although it’s no surprise, the billions of dollars used for these seemingly socialistic transactions are made possible by you and me, the taxpayer. Nice of Uncle Sam to force spending even when Bank of America said they didn’t need the government’s money.

Although forced upon them, Ken Lewis, CEO of BOA says that they will use the money to increase profits and will most likely pay off the loan within 4-5 years.  Wouldn’t it be nice if we could pay off our quick payday loans within 4-5 years?

Hypocrites?

What’s equally awkward, or shall we say hypocritical, is that our government’s politicians have had the gall to impose regulations and bans on the Payday Loan industry for its supposedly predatory lending practices.

Correct me if I am wrong but, a consumer has never been forced to take quick payday loans even when they said they didn’t need the money.

Three people, including a man officials call “the poster child of predatory lending” are indicted.

Your Cash Advance Loans News Source Quoted With Edits From: ‘Poster Child Of Predatory Lending’ Indicted (News Channel 5 Cleveland)

Cleveland’s Poster Child for Predatory Lending Doesn’t Measure Up

This article from Cleveland News Channel 5 hangs Mark Kellogg out to dry and publicly calls him the “poster child of predatory lending in America”. Kellogg as the article goes on to explain how defrauding mortgage companies out of millions by inflating home values, faking down payments, lying on loan applications, and selling homes to people who could not afford them.

Granted, I am not one to feel sorry for people like this and as much as Mark Kellogg deserves the bad publicity I don’t think he deserves the honor of being labeled the “poster child of predatory lending in America”.

Let’s Give Credit where Credit is Due?

Left in Money Shackles. Do you need Cash Advance Loans?

When it comes to this nations greatest predators the reasons are obvious and most would agree, that the biggest culprits responsible for predatory lending would be our nations banks and Wall Street themselves for the un-backed mortgage securities that they were all gambling on gambling on. Not to say that Mark Kellogg wasn’t good at his job (scamming customers) but I think his resume and professionalism pales in comparison with the billions of dollars of that were spent bailing companies like AIG out for their less then appropriate activities.

America’s taxpayers were assigned to cover the tab of these shameful activities simply because our federal government deemed AIG “To big to allow to fail”. Seems like America’s leadership needs a face lift as there judgment is more than unjust.

These banks should have been allowed to fail, taxpayers should not have to harbor criminals. After all, if you or I had done something similar, would Uncle Sam by bail us out? If you are in need of a your own financial bailout, you can apply for cash advance loans to help your finances from getting put in shackles.

(Updates with details, quotes from Dodd.) WASHINGTON -(Dow Jones)- Senate Banking Committee Chairman Christopher Dodd said Tuesday that he plans to unveil a legislative package including consumer protection measures pertaining to credit cards, predatory lending, bankruptcies and sub prime mortgages.

Your Instant Payday Loans News Source Quoted With Edits From: UPDATE: US Sen Dodd To Introduce Consumer Protection Bill (Nasdaq)

Chris Dodd. There is still an American in Washington who thinks about the rest of us!

With all the fuss by consumers in the media lately in regards to the $700 billion dollar bailout bill for the Wall Street rescue package, taxpayers who will have to pick up the tab, may get a little relieve of their own.

Senate Banking Committee Chairman Christopher Dodd said Tuesday that he plans to unveil a legislative package including consumer protection measures pertaining to credit cards, predatory lending, bankruptcies and sub prime mortgages.

Dodd, who frame the package as a counterpart to the $700 billion dollar bailout, spoke like a true American when he said the following:

“It seems to me appropriate that we take some steps to provide for the consumer as well”

It’s nice to see someone in government who is still thinking about the people of this country.

When can we expect to see the results?

Relief is Coming!

Dodd said that he will seek passage of the package after the Nov 4 election. It may be similar in nature to the stimulus check received by Americans earlier this year, and the hope of course is to once again help stimulate the economy.

It is questionable whether or not the package will provide much relief to the economy as many Americans are not as likely to spend it. This time it is more probable that Americans will take this opportunity to catch up on their finances or put the money aside in savings for fear of further economic tribulation. None the less, as consumers pay bills, whether it be from the help of the package or instant payday loans, it will help circumvent losses in revenue to local business and industry, preventing layoffs and closure.

Who paying the bill?

The interesting question to ask now is who will be paying for this relief? One could only assume that the taxpayer will be paying for this as well. I suppose owing your self for something you have given is far better than owning someone else for something you haven’t. If you are in need of quick financial relief, you can always apply for instant payday loans.

Federal bank regulators fought over turf with state agencies while America’s mortgage lending system grew increasingly unstable and then fell apart.

Your Online Cash Advance Source Quoted With Edits From: Mortgage system crumbled while regulators jousted (Seattle Post-Intelligencer)

The Mortgage Crisis. Who’s To Blame?

Everyone is up in arms and pointing fingers at who and what has caused the mortgage crisis that we and our entire economy is currently enduring. Wall Street and its firestorm selling of bad mortgage securities is primarily what has got the blame for our trouble yet there is some interesting information that has come to light that shows they weren’t alone.

A Testimony to Federal Incompetency

The article linked above gives a chilling testimony to the failure of our government to properly regulate our financial infrastructure. It seems that many of these predatory lenders were pursued locally by state officials before being told by federal regulators to politely take a hike. This left state officials with there hands tied. Much like an emergency situation can leave your finances tied up requiring you to take an online cash advance.

With the rise of predatory lending the last few years, people have suffered great losses as they have entrusted there greatest asset, their home, into the hands of those who have manipulated policy, procedure and paperwork for their own personal gain.

Freedom vs Regulation?

Is regulation necessary to protect American families?

Despite the controversial subject of government regulation, many feel it is needed even though in tends to clamp down on many civil liberties among consumers and business owners

Predatory lending has yet to be truly defined in the law books to date but legislation is in the works so as to protect consumers from being fraudulently coerced into an agreement that is not to there advantage.

Until then it is strongly advised that consumers seek multiple opinions when pursuing their financial options as one lender is likely to find problems with another lender to obtain the consumers business.

Eventually, the wrinkles will get ironed out but until then we have a responsibility to voice our concerns and our opinions as to when and how much government regulation we need to protect ourselves while keeping our freedoms in tact.

Remember you can iron out the wrinkles of your budget by applying for an online cash advance.

City Attorney Michael Aguirre filed a lawsuit against Washington Mutual, alleging that the bank engaged in unlawful subprime mortgage lending practices.

Quoted With Edits From: City Attorney Sues WaMu Over Lending Practices (KGTV San Diego)

The Fallout Continues

Will foreclosures be the next big trend?

Predatory lending continues to sweep the countryside with San Diego California making the latest news. City. Attorney Michael Aguirre filed a lawsuit Friday against Washington Mutual, alleging that the bank engaged in unlawful sub prime mortgage lending practices. Country Wide has also come under fire and has settled to pay $8.68 billion in relief to borrowers, including $3.5 billion to California.

This news comes as an unforgotten reminder to the sad state of affairs our economy is currently undergoing and how many are turning to installment loans for help. Even with the bailout which was in excess of over 750 billion dollars, we have yet to see the real damage.

Many of the false mortgage securities that were pushed by Wall Street and sold by banks to buyers have now come due. There were trillions of dollars worth of these “Credit Swaps” as they have been called, which were basically peddled off to consumers as a type of mortgage insurance. The problem however is that the banks were not required to allocate funds for these Credit Swaps. When the economy went south, the floor started to fall out from underneath them as people started to call upon the securities which they had purchased.

Hang On, The Worst May On It’s Way

The majority of the securities have yet to hit the bank leaving many nervous of the final fallout. We may just be seeing the tip of the iceberg as the larger majority of these securities have yet to hit the bank. No one knows for sure how many more will hit the bank but with the continual decline in our economy, layoffs and decreased wages are inevitable. As financial pressures mount upon America’s families and they are forced to obtain installment loans, we are bound to see the numbers increase.

On the flip side we may see things change for the better in the very near future. Tradition has shown that spikes in the economy often times come after the ushering in of a new president. Change may be on it’s way.

If you are suffering from the economic crisis you can apply for installment loans to relieve some of the stress.

A Reno lawyer is seeking class-action status for several U.S. District Court lawsuits alleging predatory practices by major lenders that have left his clients facing foreclosures and threatened sales of their homes.

Quoted With Edits From: Lawsuits allege predatory lending practices (AP via Yahoo! Finance)

Predatory lending practices have really gained a lot of attention in the past several months as the mortgage crisis has brought to light the many sub prime mortgages that are largely responsible for the number of foreclosures rates across the country.

It’ s a shame when you can’t trust the professionals in the field of work that you need to solicit services from. However here are some helpful tips you will want to consider the next time you are looking for a mortgage loan or even cash advance loans.

Cashing out equity

Is your home mortgage in good hands?

The biggest mistake that people make when refinancing is canceling out to much equity. Home equity takes a long time to build and cashing it all out renders your home worthless to you until you can rebuild equity again. If a lender seems adamant that you cash out extra equity at closing for home improvements or “life’s little emergencies” be weary. They may be trying to raise the loan amount for additional commissions. In case of life’s little emergencies, it may be wiser to get cash advance loans instead.

Predatory lenders also tend to take advantage of homeowners who have difficulty focusing on their long-term financial goals. So before you choose to cash out anything, be sure to ask your self if the choice is prudent to your future goals.

Refinancing a fixed rate mortgage (FRM) to an adjustable rate mortgage (ARM)

Refinancing a fixed rate mortgage (FRM) to an adjustable rate mortgage (ARM) may be suggested to take advantage of the current low interest rates but this is often a decision that home owners later regret as interest rates are bound to rise changing your payment schedule dramatically and often times results in foreclosure and the borrower can’t afford the higher payments.

Refinancing for Lower interest rate

Refinancing your fixed rate mortgage for another fixed rate mortgage with a lower interest rate is a great idea but be sure that you are planning to stay in the home long enough to see the savings. After refinancing it may take a few years before you start saving on the decision. This is due to the many fees associated with the refinance.

Federal Truth in Lending Act

Lastly, don’t forget that you have a three day grace period as defined in the Federal Truth in Lending Act. This grace period gives borrowers three days to back out of their loan after closing.

Trust your gut! Your home is one of your greatest assets, if you feel uncomfortable with your lender or any of the proceedings stop, walk away, and find someone else you can trust. The same advice applies when applying for cash advance loans.

Michigan homeowners could get relief from predatory lending

Quoted With Edits From: Michigan homeowners could get relief from predatory lending (WZZM 13 Grand Rapids)

Mortgages and Foreclosures

In recent times, foreclosures seem to be just as common as mortgage loans or taking out a cash advance. Foreclosures are so common because of the deregulation of the mortgage industry. Because of the financial crisis the government is finally fighting back.

The Attorney General of Michigan Mike Cox recently announced a huge settlement between the state and Countrywide Financial. Countrywide is the nation’s largest mortgage lender. Countrywide has been accused of misleading marketing and deceiving incentives, which have been attributed to the upsurge of foreclosures across the nation. The settlement requires Countrywide to refinance thousands of mortgages, to financially assist its borrowers, and to put an end to its questionable lending. The best thing about the settlement is that it’s not a bailout, it’s more like a cash advance. Countrywide will be paying for damages–not taxpayers.

A Change of Direction

Let financial freedom ring with the help of a cash advance!

It’s a good thing that government is finally taking action to combat the nation’s tumultuous financial situation. However, politicians are trying to shift from deregulation to over-regulation. Neither of those things are what America needs. Now, the government is trying to eliminate some of our financial freedoms, including access to the cash advance industry. Americans need more options when it comes to repairing our finances–not less. Let (financial) freedom ring!

Bank of America said Monday it was ready to spend up to 8.4 billion dollars to restructure the loan portfolio of mortgage giant Countrywide following settlement of a lawsuit targeting the firm’s “predatory” lending practices.

Quoted With Edits From: Bank of America to spend up to 8.4 billion on Countrywide (AFP via Yahoo! News)

Woes for Bank of America, relief for home buyers

Bank of America posted it’s first quarterly loss in 25 years as their acquisition of Countrywide Home Loans has left them with a surge of mortgage defaults and maybe a need for payday loans.

Before the acquisitions, Countrywide Home Loans settled with eleven states after being sued for predatory practices. Countrywide was accused of turning the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn’t understand or afford as well as misrepresented loan terms, loan payment increases and the borrowers ability to afford loans. At least when you get payday loans, all terms and conditions are provided up front before you receive the loan. The settlement, the largest predatory lending settlement in history, is intended to give homeowners relief from the damage which they had caused.

Bank of America. A Diamond in the Rough

Bank of America is ready to spend 8.4 billion dollars to restructure the loan giants mortgage portfolio saying it will help put borrowers back on the path to sustained home ownership.

A diamond in the rough

Bank of America has been rewarded for it’s sound decisions the past few years, as they were one of only a few banks that refused to invest in the false mortgage securities called “credit swaps”, which caused the demise of many others. Bank of America was able to acquire J.P. Morgan Chase & Co. for pennies on the dollar after it’s collapse.

With Bank of America now directly or indirectly servicing the financial needs of 50% of the US population, it is comforting to see their willingness to help the consumer and bring credibility to an industry that has been riddled with cases of predatory lending.

If you are in need of financial assistance, you can apply for payday loans with Personal Money Store.

The Area Office on Aging of Northwestern Ohio and the TRIAD Council of Northwest Ohio will host senior safety workshops today and tomorrow. The workshops, which begin at 9 a.m. each day, coincide with the Ohio TRIAD conference and will be held at The Pinnacle, 1772 Indian Wood Circle, Maumee. The events will include sessions on crimes against the elderly, predatory lending and mortgage …

Your Payday Loan News Source Quoted With Edits From: Sessions in Maumee to focus on seniors’ safety (The Toledo Blade)

Ohio is Protecting Their Elderly From Financial Predators

Caution! Is your mortgage lender taking advantage of you?

The predatory lending issues in Ohio have cause TRIAD Council of Northwest Ohio to host safety workshops for seniors. The events will include sessions on crimes against the elderly, predatory lending and mortgage rescue, power of attorney, silver alert for missing elderly people, and protecting your identity.

Much of this comes as a result of the current mortgage crisis. With a number of lenders being charged with predatory lending as well as the escalating number of mortgage defaults as a result of predatory lending. Ohio has stepped up to bat to help their senior citizens to avoid these types of predators and to educate them on the safeguards to implement to avoid being taken advantage of.

Tactics of Predatory Lenders

One of the “tell tell” signs of predatory lending is something called “mandatory arbitration”. Mandatory arbitration prevents borrowers from seeking legal options in court if they discover that their home is being threatened by loans with illegal or abusive terms. This is a big red flag and should be avoided.

Another tactic of predatory lenders is using over zealous sales tactics to pressure consumers into sub prime mortgages for there own benefit. If you feel that you are being pushed into any unreasonable terms, it is strongly advised that you seek help elsewhere. Unlike most predatory lenders, payday loan providers are up front about all terms and conditions of the loan you are obtaining, so the pressure is off and you are able to make a clear decision.

Avoiding Predatory Lenders

Identifying the tactics of predatory lenders is one thing but it’s best to avoid them if possible before you see their tactics at work. This can be accomplished by asking your candidate for referrals or by asking close family and friends for references of lenders they have personally worked with over the years and trust. This will help avoid unnecessary inquiries on your credit report which drops your score and increasing the difficulty in obtaining a loan. If you are in need of a payday loan, most lenders do not require a credit check, thus making it easy to acquire a loan that will not affect your credit.

BOSTON — At the beginning of the decade, state Rep. John F. Quinn, D-Dartmouth, was fighting to draw attention to the burgeoning issue of predatory lending.

Quoted With Edits From: Dartmouth’s Quinn pushed through predatory lending crackdown in 2004 (The Standard-Times)

Preventing Predatory Lending

In 2004, Massachusetts Representative John Quinn pushed legislation to prevent predatory lending in his state. Quinn recognized early that predatory lending was a problem, and he made an effort to minimize their presence in Massachusetts. Quinn held several meetings with banks, lenders, mortgage companies, and activists to come up with something to protect Massachusetts borrowers. Quinn’s action ultimately led to a law that strictly regulated “loan flipping” and prohibited lenders from administering fees for loans paid off early. With some of the strongest anti-predatory lending laws in the country, Massachusetts was able to nearly eliminate predatory loans within the state. However, the new law did not address legal, subprime loans.

Massachusetts is a Fine Example

Although the anti-predatory lending laws in Massachusetts were unable to prevent the citizens from getting subprime loans from national and out-of-state lenders, the laws did help Massachusetts avoid some of the repercussions of the mortgage crisis. Of course, Massachusetts is feeling the effects of the crisis, but Quinn’s actions helped protect the people of Massachusetts from being hit as hard as the rest of the country. Massachusetts and a few other states like North Carolina have strict anti-predatory lending laws. It just goes to show that the appropriate amount of regulation can do a world of good. Before the mortgage crisis, the government did not have strict enough regulations for the lending industry as a whole. Now, the government is attempting to create regulations for the whole industry, but it seems as though it’s a swing from under-regulation to over regulation. In an effort to eliminate predatory lending nationwide, some politicians also want to do away with payday loans. The federal government should use Massachusetts as its example by eliminating predatory lending, but leaving the people free to get mortgage loans, payday loans, car loans, and the like.