Dirty little secret about payday loans – annual percentage rates of 650%.

by Kevin Wack OCT 2, 2014 5:22pm ET

According to an article in the American Banker, Consumer Finance, “the Pew Charitable Trusts has conducted the most thorough assessment to date of the online payday loan business, and its findings, released Thursday, are scathing.  The report, which relied on a nationwide survey of borrowers, focus groups and data obtained from numerous sources, concludes that fraud and abuse are widespread in the Internet market.

‘It’s clear that basically the kind of self-policing of online lenders has not worked,” said Alex Horowitz, research manager at Pew.’

 

 

If a consumer signs up online for a loan, there is a good chance that the lender will automatically roll over the principal, trapping even prudent, well-intentioned borrowers in a cycle of debt.

Borrowers’ personal information may get sold again and again, and if they fall behind on payments, they may face illegal threats of arrest.

Pew Charitable Trusts, which has released three previous reports about payday lending, is a sharp critic of both online and storefront lenders. But the most recent report focuses on ways in which online lenders are different from brick-and-mortar stores.

Among Pew’s findings: nine out of 10 Better Business Bureau complaints about payday lenders involve online operators, even though online loans only make up about one-third of the total market; 30% of online borrowers report being threatened by a lender or debt collector; and online payday loans typically have annual percentage rates of 650%. Online payday lenders often portray themselves as financial-industry pioneers, but like a lot of corners of the Internet, this one has some dirty secrets.

If a consumer signs up online for a loan, there is a good chance that the lender will automatically roll over the principal, trapping even prudent, well-intentioned borrowers in a cycle of debt. Borrowers’ personal information may get sold again and again, and if they fall behind on payments, they may face illegal threats of arrest. And it is not just lenders who use the cover of the Internet to engage in questionable conduct. A sizable percentage of online borrowers seem to have no intention of ever repaying their loans.”

CLICK TO OUR WEBSITE

Taking out payday loans is ALWAYS a sign of extreme financial distress.

Once money is borrowed it is typical the loan is rolled over again and again.  This means the borrower is faced with an increasing loan while their income cannot keep pace.  A circle of despair – some people take out payday loans to pay payday loans.  Seek help – if possible change your spending habits; look for ways to increase income and decrease expenses, find financial counseling (some free information on-line at Dave Ramsey or contact my office).

458 words|2.3 min read|Categories: Consumer Issues, Payday and other usury loans|By |Published On: October 5th, 2014|Last Updated: May 29th, 2022|

Share this article

Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.

*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*

Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Google Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Yelp Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Avvo Reviews
Avvo - Rate your Lawyer. Get Free Legal Advice.
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Alignable Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Better Business Bureau
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Google Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Yelp Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Avvo Reviews
Avvo - Rate your Lawyer. Get Free Legal Advice.
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Alignable Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Better Business Bureau

In Case You Missed It

  • All Attorneys Must Return Client Calls, Even Flat-Fee Attorneys In a recent bankruptcy case, In re: Dennis Molnar, 19-bk-09525, 2024 WL 190919 (Jan. 17, 2024 N.D, Ill.), a court highlighted a [...]

  • Published On: January 3, 2024

    Understanding Why Some Bankruptcy Cases Get Dismissed or Discharge Revoked for Bad Faith Bankruptcy is meant to offer individuals and businesses a chance at a fresh start by alleviating financial burdens. However, [...]

  • If Keeping Your Home is Important, Know Rules of Bankruptcy  Experiencing bankruptcy brings both challenges and uncertainties Facing bankruptcy can be a challenging and uncertain time. One of the most [...]

  • The article titled "Dangers of Using Public Wi-Fi Networks" posted on Galloptech Group's blog offers a comprehensive and insightful exploration of the risks associated with using public Wi-Fi networks. Here's an outline of what makes [...]