Author: admin

  • Lawrence Myers is Right

    If you get a chance, read Lawrence Myers blog post titled Payday Loans: Calling out Josh Kalven.

    Besides the fact that Josh Kalven doesn’t know what he’s talking about, Lawrence basically gives the borrowers’ options. I think these are excellent (excerpt from his blog) and worth sharing:

    Options are limited, and payday loans (and installment loans) are neither the most nor least expensive.

    A) Borrow from friend/relative/employer?Cost: Zero???Risk: Complication of important relationship, embarrassment
    B) Credit Card Cash Advance ???Cost: About $1 per hundred every two weeks???Risk: Fail to pay; credit rating is damaged
    C) Pawn something???Cost: $9.50 per hundred every two weeks???Risk: Fail to pay, you lose the personal item.
    D) Payday/Installment Loan???Cost: Averages $16 per hundred every two weeks???Risk: A collection agent tries to recover what’s owed; no damage to credit rating; no personal item at risk; no personal relationship at stake. ???Myth: “Cycle of Debt” – 94% of loans are paid back on time — that statistic is available in every single SEC filing of all public companies.
    E) Online Payday Loan??Cost: $25 – 30 per hundred borrowed every two weeks??Risk: Same as regular payday loan, but industry is unregulated and identity theft is easier.
    F) Bounce a check???Cost: Averages $45 per hundred borrowed???Risk: As soon as you bounce one check, you risk creating a domino effect, causing other checks to bounce and running those fees even higher.

  • Virginia payday loans down 84%

    This is a bit misleading. Many companies, like Advance America, are offering revolving lines of credit secured by an auto title loan.

    The new payday loan laws essentially doubled the amount of time borrowers had to pay and limited borrowers to one payday loan at a time.

    The big question here is: Does legislation work and does it help or hurt the consumer?

    One borrower Sheila Woods said that she preferred the original payday loan because she always knew what she would owe, although she admitted they can be addictive. She said she’s gotten away from the dangerous “vicious cycle” of relying on payday or open-end loans.

    Payday loans are a simple product that consumers understand. Isn’t that what we’re going for?

    You can read the full article in the Daily Press.

  • New Mexico installment lenders under fire

    New Mexico’s attorney general is going after installment loan lenders.

    Payday loans by New Mexico State Law can charge $15.50 per $100, but there are no rollovers and a 10-day cooling off period. The law did not address loans longer than 35 days.

    A spokesman for Attorney General Gary King said:
    “We’re more interested in these type of companies not doing this again than we are trying to get money out of them.”

    You can read more in the Daily Times.

  • Attorney Sues Americash for PayDay Loan Hell

    It’s no secret that the current payday loan laws in Illinois, for lack of a better word, suck. Every cash advance lender, to my knowledge, is offering installment loans; which makes this class action law suit seem pretty silly. Americash is getting singled out for providing installment loans, under a completely different law and license.

    Enter Tom Geoghegan; a Harvard educated lawyer.

    “The fact that Americash has changed the loan terms to a loan greater
    than 120 days doesn’t make it any less a Payday Loan; in fact it makes it a more abusive loan because they are by definition for very short term needs at very high interest rates. Americash is extending it to unconscionable lengths locking people into these very high interest rates,” says Geoghegan.


    You can read the full article in Lawyersandsettlements.com.

  • Payday loan ponzi scheme ring leader disappears

    David Hernandez has a warrant for his arrest. The charges are for mail fraud, but the bigger picture is a payday ponzi scheme he operated.

    What’s worth mentioning about this story is that if someone offers you “guaranteed investment contracts” at rates of 10-16% you should run. It’s too good to be true.

    The FBI made this statement:

    “Deposits from investors were “frequently followed by issuance of checks payable to a variety of individuals who previously provided funds to Hernandez and NextStep,” the affidavit said.


    You can read more about this story in the Chicago Tribune.

  • South Carolina passes new payday law

    The Governor’s veto was over-turned. As a matter of fact, all ten of his vetoes were over turned.

    Bill 3301: Regulates payday lending by limiting loans per customer and establishing a cooling off period between loans. House voted 105-4, Senate 39-3.

    It also limits each borrower to one loan, while increasing the max loan amount to $550.

    So the next big question is, who gets to give the customer his or her one loan? I hope you have a good location.

  • Good economics view of payday loans and price control

    Mark Schug is professor emeritus and former director of the Center for Economic Education at UW-Milwaukee. He is a national consultant on economic and financial education. Here is something that really resonated with me:

    “Anyone who has taken high school economics should see how this artificial price control would cause problems, but it seems that many have forgotten the lessons of Econ 101. A recent poll found that a large percentage of Americans actually support federal price controls on everything from sports cars to cups of coffee.

    What price-control supporters don’t understand is that when a new price level is imposed by legislation, consumers will want more of the product than suppliers can provide. So in the case of short-term loans, the result of a legislative price control will be shortages in the market. At a number as low as 36 percent, those shortages will be severe.”

    You can read the full article in the Janesville Gazette.

  • Tim Miller editorial in the Sun Sentinel

    “Legislators and activist groups are using the economic crisis as cover to build an ever-increasing safety net that rewards reckless behavior at the expense of responsible consumers”

    I agree with Tim. The government is putting training wheels on voting adults. Not good.

    You can read the full article in the Sun Sentinel.

  • Payday loan ponzi scheme

    Federal regulators accused the owner of a Chicago sports website on Monday of running an $11 million Ponzi scheme.

    The accused, David J. Hernandez, allegedly misrepresented the company as a successful business that invested in payday loan stores when in fact it was out of business. It also said he lied to investors when he said their investments were insured.

    You can read the full aritlce in the Chicago Tribune.

  • South Carolina looks to undo Gov. veto

    A payday bill that is supported by the industry, consumer groups and legislators passed 41-4 in the Senate and 102-6 in the House. The Governor decided to veto this bill. Law makers will probably over-ride this veto.

    This article in The Sun brings up a good point:

    “The administration has always fallen solidly on the side of maximizing individual liberty – so people are able to make both the stupid, and wise, decisions that are the hallmark of a free and market-based society,” the governor wrote in his June 2 message.

    In a free market society, to make it work, we have to let people make bad decisions; if that is their will. If you don’t, it’s not free.

    A spokesman from Advance America had this to say:

    “the measure helps those who can’t pay, while ensuring access to the short-term credit.”

    My understanding is, let people make decisions for themselves, whether their good or bad; but let’s alleviate the consequences if they’re extreme.