For a moment, imagine debt-laden payday loan customers as shipwreck victims, bobbing around in icy water as sharks nibble at their toes.
The House of Delegates and the Senate have each sent out a rescue boat. The House boat fishes all of the soggy souls out of the water and hauls them to safety.
The Senate boat cruises past the folks who are treading water because they look like they're holding up OK. The senators stop only when someone starts sinking in the waves and sputters out a plea, "Please, toss me a life vest."
Delegates and senators will spend the next three weeks arguing over which way is the best to reform the payday loan industry. You don't have to be a fan of the movie "Titanic" to understand that the House has organized the best rescue mission.
Payday lenders are supposed to offer small, short-term loans to help people with poor credit get through a temporary emergency. But that business plan can't sustain the 800 debt traps that have set up shop across the state.
Predatory lenders survive by encouraging customers to roll their loans over repeatedly, racking up fees that can equal a 391 percent annual interest rate. In 2006, 97,000 Virginians took out more than one payday loan a month. They were trapped in a cycle of debt that consumed them for most or all of that year.
To protect their constituents from these kinds of predatory practices, lawmakers must break that cycle. The House bill does so by limiting borrowers to one loan at a time, with no more than five a year. It guarantees customers two payroll periods to clear each loan.
The Senate version, preferred by payday lenders, offers minimal help for repeat borrowers as long as they manage to keep their obligations from growing and avoid default. If they get in trouble, they can request extra time to pay off the debt without accruing interest.
In states that offer similar extended payment plans, few customers take advantage of the service because they can get a new loan with less cash up front. They learn to cope with long-term debt by treading water, but they can't escape.
Until the Senate offers a lifeline to those people, it has not solved the problem of payday lending in Virginia.
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Victims huh?
Thanks. I really appreciate being called a victim! That's crap! I am not a shipwreck victim. I am not prey that the predatory lenders are feeding on. I have never been attacked, killed, eaten, or forced to use any of the services that the payday lenders provide! I go in there of my own free will and freedom. My God gave me the free will and my country gave me the freedom to make my own choices. My choices have slimmed since my credit score has dropped, but payday lenders have always been there for me in a pinch. And I am tired of you people saying that I am less educated, victimized, and helpless against the payday lenders. I use them because I have no other choice, and I am happy to pay the fees that they charge. I don't get into any cycle of debt, I pay them off when they are due. So get off the payday lenders. If there is a problem with some of the borrowers, focus on them, and leave the payday lenders for those of us who can use them as a tool to help us through.
And don't forget other major parasites,
ATM fee's
You get charged by the bank the owns the ATM, byt eh bank that houses the money you are withdrawing from.
Oh yeah, and have you ever looked at your phone/cel bill. I still don't know what half of those fees are for (convenience fee???).
Payday loans are just one more in a long line of predatory practices, I remember years ago my getting caught up in some sort of Purchase Power scam, no one was around to save my butt from wasting thousands of daollars for nothing then, why should it be any different now...
Let the buyer beware.
Pro-Business legislation hurts the consumer
Agreed - those examples you cited are also opportunistic, but not to the degree that payday lenders are. Under the current laws, I believe a customer can renew a loan time and time again -- each time, paying just the fee. When you consider that the payday loan company's target customer base is people with poor credit (and probably low income), their industry practice is that much more insidious.
opportunistic parasites
Here are some more opportunistic parasites:
-Check verification companies, who charge a fee if you bounce a check
-Businesses, who charge a fee if you bounce a check
-Banks, who charge a fee if you bounce a check
-Banks, who give unsecured short-term loans
-Credit card companies, who charge a fee if you exceed your limit
-Credit card companies, who charge higher rates and extra fees for cash advances
BTW, bounced checks and cash advances were my 'payday loans' before they were popular. Still think that limiting payday lending will protect people from themselves?
jmo
You can't blame the lenders...
They're like any other opportunistic parasite. We can, and should, however, blame the legislators who allow their predatory lending practices to continue.
Seatbelt laws were enacted to deter people from putting themselves and their passengers at risk of serious injury, thus proving that sometimes we need to have laws in place to protect us from unintentionally doing ourselves harm. Similarly, laws which limit the number of payday loans, as well as limit the overall cost (interest, fees, charges, etc.) of those loans should be enacted to protect people from doing themselves financial harm.
The ease of obtaining a payday loan and the subsequent pain of being caught in the trap of the lender reminds me of the story of a frog who hopped into a pan of water. The frog felt great for a while, but eventually started getting warm. What he didn't realize was that the water was being heated -- and before he could get out, he became frog soup.
Author of this article has it wrong
The lenders aren't at fault. No one is holding a gun to the borrowers' head. Smart Americans pinpoint a short term need of consumers and find a way to make a profit. Heck, not just Americans, but the entire human history has supported profiting on others short term need. God praised Jacob and built a nation from him because he was smart enough and prepared enough to satisfy his brother's short term hunger in exchange for his birthright. Would the author of this article also wish to absolve Esau and give him back his birthright? Probably. Which is why I think his point is mistaken. People are responsible for the bad deals they make.
What word is missing?
"Democrats"
Funny how that word doesn't appear in an editorial criticizing the VA. Senate (run by Democrats), but when you criticize the House, like on the smoking ban, that word "Republican" just flows from your pens.
Debt traps?
Once again, you blame the lenders, and not the individuals making poor decisions. You believe that limiting or abolishing the service will help people break their cycle of debt. But when the payday lenders are gone, the undisciplined among us will remain in debt as they turn to signature loans and high interest cash advances from credit cards. A $500 loan or cash advance at 36% will seem manageable when making minimum payments. Paying it back in 12 months results in monthly payments of around $50, which is much easier than paying back $500 in two weeks. But paying back over 12 months results in $28 more interest than the $75 the payday lender would have charged (plus cash advance fees). A $500 cash advance every two weeks would have a far more devastating effect than a $500 payday loan every two weeks.
There are plenty of options out there for getting into debt. Are payday lenders really the worst?
jmo