Author: admin

  • Taking a different angle on payday loans

    Ray Fishman writes a thought provoking article in Slate Magazine about the psychology of payday loans titled “400 Percent APR—Is That Good?“

    What I like about the article is that it approaches payday loan abuse from the correct angle. Basically, he says that most people using payday loans do not understand the true cost of the transaction and the the APR actually is not a good metric.

    I know this isn’t going to be popular, but I want to see this industry continue. Quoting a payday loan as a daily rate $2.35 per day, is a bad idea. Trying to make an expensive product look inexpensive is why most people turn off when the industry talks.

    Payday loans are expensive because many people do not pay. The people that pay have to cover the losses for the people that don’t pay. This is why 36% does not work. Every lender would go out of business.

    Legislators, instead of limiting rollovers, should demand another, more practical, method of disclosure. Create an schedule for a loan that is rolled over 3 times and show the nominal cost of the loan.

    Anyone that’s been successful in this industry knows that if the borrower needs the money, they’re going to take it. Maybe this type of disclosure could be used to build credibility for the industry.

    As far as I’m concerned, providing clearer disclosure will win over the people that are on the fence with payday loans. That’s what the payday lending side needs to do. Get people that don’t care, to care; and be on our side.

  • Payday loans Internet Fraud

    This is a follow up on an a story from a week ago, in the Chicago Tribune. Here are the facts:

    • Contract worker at AT&T steals 21,000 employees identities.
    • Gets $70k in payday loans.
    • Payday One and QuickClick are the victimized online payday lenders.

    Here’s what’s wrong w/ the article:

    The Chicago Tribune reporter blames the bank and the internet lenders. “more restrictions on online payday loans. Some banks also need to tighten their rules, he said. Some allow checking accounts to be opened online without running credit checks or verifying addresses, he said.”

    Hello? Anyone home? What about AT&T? Didn’t they give access for all this data to a contract worker?

    Obviously, there were some Internet lenders that said “no”, while others said yes. So how does the industry prevent this in the future?

    1. There should be a better way to verify the identity of a bank account. Unless the identity thief opened the online bank accounts in the name of the ATT employee.
    2. Next question: Can you open up an checking account in another person’s name? If so, what banks are these. This is a big red flag.
    3. Payday loans do not affect your credit rating. This article claims that they can. To my knowledge none of the big 3 credit bureaus take this data.

  • Wisconsin battle heating up over payday loans

    Wisconsin is turning up the heat on payday lenders. Today, Wisconsin, does not set an interest rate cap. Some legislators are talking 36%.

    Nothing new here except for this comment:
    In 2004, $500 million in loans were made by payday lenders in Wisconsin, with 80 percent of that revenue leaving the state because most of the establishments are owned by out-of-state investors.

    I understand their point, but don’t really agree with it.

    You can read the full article at HTR News.

  • Virginia is getting into the emergency-loan business.

    The Virginia State Employee Loan Program will offer small loans through the Virginia Credit Union and allow state workers who are members to borrow up to $500 twice a year.

    The loans will be 6 months and carry a 24.99% APR.

    I guess we’ll see what happens. Personally, I’m fine w/ this if they leave the payday loan industry alone. Competition is better than legislation.

    You can read the full article in the Richmond Times Dispatch.

  • Major Internet lending ruling handed down in Pennsylvania

    The state of Pennsylvania ruled 4-3 against Cash Net USA. I smell an appeal.

    What’s interesting is Cash Net USA’s defense, which I think is very clever. Attornies for Cash Net USA argued:

    Pennsylvania’s 72-year-old banking regulations could not anticipate the advent of the Internet, and thus make no mention of out-of-state lenders.

    You can read the full article in Pittsburgh Post Gazette.

  • Bankrate.com’s poorly written article

    Article titled “4 alternatives to payday lending“. This is one of those gee wiz articles b/c it’s so naive.

    Let’s face it, if these four options were a better alternative, people would be using them.

    1. Credit union loans.
    2. Small bank loans.
    3. Credit counseling help.
    4. Other options.

  • Bankers weary of consumer watchdog agency for financial products

    President Obama wants more watch dogs. The financial community does not agree. The agency would oversee just about every available consumer financial product, from payday loans and credit cards to loans from banks and nonbank mortgage lenders.

    Answer this much, “How effective is the SEC?” Hello Bernie Madoff. We don’t need another straw man.

    Anyway, there is some good banter on this proposed agency here.

  • Atleast $70k fraudulent Internet loans

    “A temporary employee for AT&T was arrested today on charges she stole personal information on 2,100 co-workers and then pocketed more than $70,000 by taking out short-term payday loans in the names of 130 of them.”

    That’s pretty scary. I wonder what the lenders could have done differently. Didn’t they realize that all the money was going into just a few accounts?

    I think matching a person’s name with a bank account is a great service. Can anyone recommend one?

    You can read the full article in Chicago Breaking News.

  • Let’s Treat Borrowers Like Adults

    Payday Pundit found an excellent opinion, written by Todd J. Zywicki, professor of law at George Mason University, in the Wall Street Journal titled, Let’s Treat Borrowers Like Adults.

    The opinion is a great read, but I seem to be enjoying the comments these days. This one is hilarious:

    Darren Keenan wrote:
    Hear hear, yes. Let’s treat adults like adults. When it comes time for me to pull some of the equity out of my home, I want all the options I can get. If those options are too complex for me to understand, then I (and by “I”, I mean everyone) shouldn’t be looking to use those products. “A man has to know his limitations” someone once said.It would be nice if we had the option of signing a piece of paper declaring our adulthood so we could take advantage of programs outside the government’s purview. While removing risk usually lowers rates, in this case, the cost of risk removal would lead to higher rates. Can I (being a mature adult) decide for myself what risk/rate I find acceptable?That would be a nice change from where things are headed.

  • Is St. Petersburg mayoral candidate Deveron Gibbons in the predatory loan business?

    The short answer is: NO. Payday loans are filling a need. The first half of the article disucsses Deveron Gibbons, who is a good lobbyist and running for mayor. He works for Amscot.

    Here is what CEO MacKechnie had to say:
    “There is a demand and need for these services. We have never taken advantage of a consumer and never will,”

    Here is what Jean Ann Fox of the Consumer Federation of America said:
    “They drain a lot of money out of the community and put a lot of consumers in a debt trap,” of “payday lenders” like Amscot.

    Ms. Fox’s statement is rediculous and it shows her true colors. The woman is a communist. You can say the same thing about Starbucks. She obviously does not want anyone borrowing money, anywhere. Hey lady, it’s a free country, get with the program. Who made you president?