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In North Austin, there are signs here and there advertising “cash” and “loans,” signs that used to beckon to Wanda Hopkins.
“I am a recovering payday loan user,” she said Friday as she stood outside of PLS Check Cashers at North and Cicero avenues.
Hopkins lives in Austin, where the streets are sprinkled with payday lenders and quick-cash businesses. There’s a disproportionate concentration of these high-interest lenders in Austin and other communities of color, and that’s not good, says a report released this week by the National People’s Action.
“I just felt myself drowning in payday loans. I’d go to one payday loan, and then go to another payday loan to pay that payday loan off,” she said.
After the death of her daughter and losing her non-profit job because of funding cuts, Hopkins was left with a stack of bills and three children to take care of. That’s when she went to her bank for help but was turned away.
“People are denied access to adequate credit, and a lot of time they’re forced to use these payday loan places,” said Elce Redmond, a community organizer for the South Austin Coalition.
“Wells Fargo (and) U.S. Bank have interest in a lot of these payday loan companies, and they’re the ones that are funding these payday loan companies,” he said.
And there’s the rub, he and other advocates for the poor and middle class say.
What’s more insulting to Hopkins is that Wells Fargo, Bank of America and U.S. Bank fund 38 percent of the payday lending operations in the Midwest area the report studied. This means some big banks won’t lend to people like Hopkins directly, but they’ll fund high-interest lenders who turn around and loan to people with interest rates up to 300 percent.
“It is 20 times more than a credit card,” said Nick Bianchi, a research analyst for National People’s Action.
Last year, Gov. Quinn signed an amendment to the Payday Loan Reform Act of 2005 tightening restrictions on payday loan companies. Starting next month interest rates for longer-term loans, called consumer installment loans, will be capped at 99 percent (before there was no cap), and short-term loans will continue at $15.50 for every $100 borrowed. New restrictions will also make it harder those like Hopkins to bounce around from loan to loan, gaining massive debt.
“If you can’t make money charging 36 percent, there’s something wrong with your business model,” said Kathleen Day from the Center for Responsible Lending.
That’s the interest percentage that was deemed acceptable by Congress for loans made to military personnel, another group that attracts these kind of lenders, according to a report compiled by the Center for Responsible Lending.
“If it’s not good for the military, why is it good for anyone else?” Day said of high-interest lending to military personnel.
In March, the new law will make Illinois a leading state in high-interest lending transparency, said Lynda DeLaforgue, co-director of the Citizen Action of Illinois, which led a campaign for the 2005 reforms.
“Information about all these products are going to go into a statewide data service,” DeLaforgue said.
Ideally, the data collected from Illinois could be used by other states wanting to monitor the behavior of these lenders, she said. But for some, the damage has been done.
“You will never win it. You are never above board,” said Hopkins, who after six years stopped going to payday lenders and now struggles with debt collectors.
“That’s why I can’t answer my telephone,” she said.
But, she said, it’s better than the alternative.
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Payday loans are typically for two-weeks not an entire year, and comparing them to ANNUAL interest rates is misleading.
At 36 percent APR, the total fee charged on a $100, two-week advance, would be $1.38. Payday advance lenders could not cover the cost of originating the loan, let alone meeting employee payroll and benefits and other fixed business expenses, like rent.
Such a rate cap would virtually eliminate payday lenders, but not the need for short-term credit. Instead it forces consumers to choose between more expensive alternatives, such as fees for bounced checks, overdraft protection, late bill payments, reconnection fees for a utility discontinued for lack of payment or even unregulated off-shore Internet lenders.
I work in the industry, and working adults are best served when given a variety of options and trusted to make financial decisions based on what’s best for them and their families.
My company charges $20 for every $100 borrowed for two weeks.
I’ve worked in the Payday loan industry for years. People need money from time to time. Life happens. The typical re-payment for borrowing $100 is between $15 and $25 depending on where you go, and the typical length of the loan is designed to range between 14 and 30 days. In order to be approved for a loan, one must be employed, though the article would have you believe otherwise. Several companies, including mine offer customers multiple payment options to prevent customers from needing to roll these loans over and get trapped in the cycle. Some companies even offer an interest free option for those that feel they are caught in the cycle and need help.
People will continue to need money. The question is, where will they go to get it? If not us, then who? Ever bounced a check? I have, the banks will charge $35 on a $2.00 check. Talk about a high interest rate. Ever been late paying your gas, electric, water or cable bill? Late fees are much higher than fees associated to payday loans. Ever have your utilities disconnected for non-payment. Having them turned back on is brutal. Ever been more than three days late with the rent? Apartment complexes charge daily late fees that are impossible to get out from under.
I have been where my customers are. I’ve been evicted from an apartment because I couldn’t catch up the late fees. I’ve had every utility turned off at least once, and I’ve had credit cards charge more in late fees and interest rates than I care to remember.
I’m fortunate, I’m doing well now. That said, if I have an emergency and need some quick money, there isn’t a bank anywhere that will lend me a couple of hundred dollars for two weeks.
Payday loans help people that need a little money from time to time. The loan offers consumers an alternative to paying a late fee or a bounced check fee. People need to be able to choose for themselves what best meets their needs.
Several states have regulated fees to where businesses cannot pay their overhead. Good, hard working people in my industry have lost their jobs. No one offered them a choice.
The payday loan industry, is a predatory industry that preys on
African-American and Latino communities. Payday lenders issue
loans, typically up to $500 for two weeks or one month terms, at rates over twenty times that of credit cards to borrowers with
documented income or government social security/disability checks. In neighborhoods with a high population of African-Americans or Latinos have an average of two payday lending locations within one mile, six payday lenders within two miles, and
12 payday lenders within three miles, Let’s also take in account that
community banks within communities of color are closing and being
taken over by the big banks. The same big banks, that include, Wells Fargo, Bank of America, and US Bank fund approximately 38% of the payday lenders that saturate our communities. It’s a
killing joke that the same big banks that caused the economic crisis
and were directly responsible for destroying the economic wealth of
African-Americans through the foreclosure debacle, are the same
insitutions that are funding the malevolent subprime payday loan industry. The payday loan industry isn’t helping low-income African-Americans and Latinos get through an economic emergency
situation as they advertise on television, what they are doing is
embroiling people into a new system of economic serfdom and or
“debt slavery” I know that the term debt slavery is very harsh, but
appropriate for an industry and its apologist who have made millions off the backs of low-income families.
I work in the industry and will say our shops are loacted in population centers, convenient locations where customers live, work and shop.
The industry continues to be accused of locating in communities with high populations of women, Hispanics, the elderly, African Americans, recent immigrants, young people, social security recepients, veterans, the poor and households with a median annual income of $48,000. A “Business Week” article said payday lenders are now targeting more affluent neighborhoods.
While critics of the indutry assign labels to payday lending customers in an attempt to further their political agendas, the fact is that we provide services to a broad cross section of Americans because there is widespread demand for the financial service we provide. Our customers represent a large demographic segment and cannot be grouped based on race, sex, or religion.
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