The Payday Pundit shines a light on payday alternative loans. The blog is titled, “$120 for a $100 Loan.“
Note to legislators: It costs money to do business. The people that pay, pay for the people that don’t pay.
I don’t see payday lenders getting government bailout money. Payday lenders know the true cost of sub prime credit. That’s why they charge the fees they do.
These comments come from the Canton Rep.
“The only difference I see between Pay Day lenders and loan sharking is the latter is illegal and the former should be. If you can’t make a decent profit off of a 28% rate of interest you’re obviously in the wrong business.” Retired Banker
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“Retired Banker: I’m surprised with your ‘banking education’ you dont realize what a 28% APR is on a 2 week loan. There is no decent profit. 28% APR on a two week loan is $1.07. It costs more to print the contract. Payday Lenders have overhead like any other business. These are high risk loans, loans that banks won’t give. These loans are needed by consumers with less than fair credit for emergencies. I work for a lender, and am proud of the business. I know the behind the scenes workings of the company and feel the media/blogs have made a poor representation of what a payday loan was. The payday loans charged 15% of the loan as a fee. Thats IT, but when you take that figure and multiply it to appear as a ANNUAL rate, it looks ridiculous, just like 28% APR divided down to a 2 week loan is ridiculous to believe any business could survive.” taramapes
I’m a little surpised at Retired Banker. Maybe he’s just a Monopoly Banker and not a real one.
36% has come to pass in a few states. In Ohio, they’re fighting for their lives with Ohio HB 209.
Wisconsin is doing the 36% dance.
Here are some good comments from New bill confronts payday loan industry:
“This story does not share the argument of payday lenders, who favor reform in Wisconsin. The problem is the 36 percent rate cap, which is a ban of the payday loan product and strips citizens of a needed short-term credit product.” Ryan 458
“Put this kind of business back in the hands of those who know how to get those loans paid – the loan sharks. The loan sharks can charge lower rates since they collect a greater portion of the debts. It make take a beatdown, a missing finger or busted kneecap to ensure that those debtors make their payments, but it’ll be better for them in the long run AND they will learn to be more responsible with their credit!” Anonymous
Just for fun, let’s take a shot a ObamaCare:
“If you “really don’t appreciate big brother making my decisions and dictating” then I don’t think you’ll like Obamacare or much else of the coming Obamanation.” Anonymous
If you have a question about the industry, we can try and answer it.
Just leave your question in the the comments section of this post.
The Prism Group, a Columbia based company, is holding up the deal to award Veritec Solutions the contract for The South Carolina payday database. Similar databases are already in use in states like: Illinois, Florida, Michigan and Indiana.
The Prism Group thinks the deal is worth up to $15m over 5 years and does not think the state got this right.
You can read the full story in The State.
Minneapolis-based U.S. Bancorp, Wells Fargo & Co. of San Francisco, and Fifth Third Bancorp of Cincinnati — are now marketing payday loan type products, with triple-digit interest rates, to their checking account customers.
“Banks are in a strong position to steal a big chunk of the $35 billion-a-year payday lending market — with its estimated $7.3 billion in fees from borrowers, say industry analysts.”
The banks are charging $10 per $100. These fees claim to be half (for the record, they’re not) of what a typical payday lender would charge. They estimate the typical payday lender charges about $17 per $100. Banks fees should be lower. They incur less risk than traditional payday lenders. Banks own the checking accounts and may additionally run credit reports for approval. Of course, they will have lower delinquencies due to smaller risk pool and full access to the borrowers checking account for collections.
When banks offer payday loans, the “on the fence” general public will start to accept the payday loan product. Let’s face it, the industry is never going to change a self righteous, bleeding heart liberals’ mind. All we can do is go after the middle 80%.
The only issue I have today is that banks don’t operate under state law. They can offer payday loans in the 15 “black out” states like New York, New Jersey, North Carolina, Georgia, Arkansas among them. These states should open their doors. It’s discrimination, otherwise.
I think the industry should use this as a sounding board. Let the banks offer payday loans. Let anyone offer cash advances.
You can read the full article in Minneapolis Star Tribune titled “Biggest Banks Stepping into the Payday Loan Arena“.
“these are toxic loans, just like those in the disastrous subprime mortgage industry, because they are made knowing that desperate borrowers cannot repay the loans when they become due.”
Do they really think lenders do NOT want to get paid back?
This rediculous comment was brought to you by Legal Aid Society’s litigation director Peter M. Koneazny.
You can read more about Wisconsin and payday loan battles in the WisBusiness.com.
Same story different state. I guess we’ll see what happens.
I thought this was worth sharing:
Payday lenders have seen an explosive growth of 391 percent in Wisconsin over the last ten years, rising to $723 million in loans in 2008 from $147.2 million in 1998.
There’s lots of demand out there. You can read the full article in the Wisconsin State Journal.
A 40-year-old “self-made multimillionaire” with more than 50 “retail financial outlets” that will help you walk on burning coals.
I secretly love this “mind over matter” stuff.
Here is an excerpt from the Dallas News article titled, Can a walk on hot coals lead you to enlightenment?
“How many of you were raised with the concept that ‘money is the root of all evil?’ ” he asks with a voice that could have inspired Ian Fleming “My belief system says that’s absurd.” Horton fills us in on his mobile-home childhood with a dad on the run from the IRS. Starting a check-cashing business as a teenager, he went on to make some major money with a payday loan company and attended seven Tony Robbins seminars. Throwing in a quote from Donald Trump, he promises we can achieve Black Card status, too, and we need only work 15 minutes a day for $1 million a month. He does. I see dollar signs in everyone’s eyes.
This is a PDL forum. Does anyone know Charles?
Payday Pundit shares a very intelligent article about the CFPA (Consumer Financial Protection Agency). I would like to add my $0.02.
Start by reading this blurb from the article by Megan McArdle:
“For some people this is an argument for laws that make it unprofitable to loan money to people who are likely to default, aka those living on marginal incomes. The problem is, there are two groups of people among the poor: those who will be made better off by credit, and those who will be made worse off. Judging from the bankruptcy statistics, the former group is larger. And there is no way to distinguish between them. The alternate forms of credit that poor people have traditionally used, like pawn shops and loan sharks, are worse than Bank of America.”
My opinion is that as long as the government and press baby people who make bad financial decisions for themselves, it’s going to be hard to lend money to people that need it. Instead of looking at payday lenders as part of the credit cycle. They want to demonize them and make them as unprofitable as possible. The problem is that this inevitably lets irresponsible borrowers off the hook (in their own minds), and the cycle continues.
I just don’t get the insanity of all this. If you ate liver and didn’t like it, then you stop eating liver. If an adult takes out a payday loan and does not like it, then they don’t have to borrow again.
Here’s the full video: