Payday Advance Lenders Predatory? Survey Says...

Payday Advance Lenders Predatory? Survey Says... No.

Donald P. Morgan of the Federal Reserve Bank of New York published his report on payday cash advance lending in the January 2007 Federal Reserve Bank of New York Staff Reports, no. 273

If you have the time and inclination to review the report you may find it interesting. It is available on the Federal Reserve Bank of New York website.

The key points are illustrated in the abstract found on page two of the report as seen below.

The abstract of the report states, We define predatory lending as a welfare-reducing provision of credit. Using a textbook model, we show that lenders profit if they can tempt households into “debt traps,” that is, overborrowing and delinquency.

We then test whether payday lending fits our definition of predatory. We find that in states with higher payday loan limits, less educated households and households with uncertain income are less likely to be denied credit, but are not more likely to miss a debt payment.

Absent higher delinquency, the extra credit from payday lenders does not fit our definition of predatory.

Nevertheless, it is expensive.

On that point, we find somewhat lower payday prices in cities with more payday stores per capita, consistent with the hypothesis that competition limits payday loan prices."

My interpretation of what Dr. Morgan is saying is essentially that in order to be a predatory lender, one has to set "debt traps" for folks to enter into. In other words, lenders need to push a borrower to take on a larger loan than they will be able to pay back.

Dr. Morgan studied various markets where payday lenders operate. Different states have different fees. The Federal Reserve concluded that borrowers in states with higher payday loan limits did in fact provide more credit to households with less earning visibility but for whatever reason, those households were not more likely to become delinquent on those loans.

If the households are not more likely to miss the debt payments, the loans are not considered to be predatory by the Federal Reserve.

An interesting point, that Dr. Morgan brings up is that competition is alive and well in the industry. Cities with more payday lenders operating had lower average payday advance rates. This goes against the theory that many city councils across the country are adopting in order to protect cash advance customers. The theory is that there are too many payday advance lenders out there. The Federal Reserve finds this conclusion to be false and certainly not more beneficial to the consumer.

As you know, I am not a proponent of cash advances for young families. I believe that there are many credit alternatives to turn to. I do believe that cash advance lenders should be allowed to operate their businesses.

There are limited circumstances when a payday loan may be your only alternative. If you take a payday cash advance, keep a few things in mind.

First, please only borrow what you will be able to pay back when you get paid from your job. Make sure you still have money to get through the month.

Do not roll existing payday loans as it can be a disaster financially.

If borrowing online, look for a US-based lender where you can actually speak to a human being. Many of these lenders are completely anonymous, un-regulated, offshore entities. You'll never know who you are dealing with.

Remember, please always borrow responsibly.

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Online Payday Loans are the Wrong Way to Financial Prosperity

Online Payday Loans are the wrong way to financial prosperity when you are in need of credit. We've all seen it too many times in the past with friends and family who didnt fully lay out the consequences of taking an expensive short term, fast cash loan. This Youtube video lays it out nicely.



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The link below is for a US-based, licensed lender, with employees who will be happy to speak with you about applying for a loan at 1-866-606-5626.





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Advice on Personal Finance

I have the opportunity of corresponding with various "experts" on personal finance issues, especially debt related matters. This broad perspective has allowed me to connect the dots in terms of what's really going on.

To summarize, the stores at the mall care about one thing. They care about how much of your hard earned money they can take out of your wallet. Wait, actually that isn't technically true, because they are not satisfied with what's in your wallet. They want what's in your wallet and even more. They want you to borrow money from Mastercard, Visa, go for an online payday loan service so that you can spend even more money at their store.

Knowing this situation, you may ask why would a consumer agree to spend their hard earned money and take on debt to buy items?

The answer is very simple. Madison Avenue has "sold" Americans on this idea that we all need more stuff to make ourselves feel good. We need to have the latest and greatest television, car, clothing, etc. We have been conditioned to believe this and many Americans are living paycheck to paycheck because of this notion.

One of greatest creations on the planet is compound interest. The real way to wealth is to get as much money compounding year after year at a nice rate of return. You will see the growth in your dollars, incredible. Compound interest also applies to debt.

When you take on debt, you are agreeing to pay rather than receive compound interest to someone else. It starts the clock running and won't stop until you have back the loan plus the interest.

You don't need more stuff to make you feel good. You don't need more stuff to make your friends and neighbors like you. What really feels good is eliminating debt from your life so you can be the one benefiting from compound interest, not being ruined by it.

Squidoo Payday Loans Alternative Blog Will Save You Money!

Here's a recent Squidoo url Payday Loans Alternative Blog that you may find of interest. The site combines reading and video to produce a nice educational financial site to help you with your personal finances.

The objective is to make sure you know what you're getting yourself into before you step up into a payday cash advance loan. This is a great site to check out every few days.

PR Campaign Won't Make Payday Loans a Smart Deal

PR Campaign Won't Make Payday Loans a Smart Deal

The Torrance Daily Breeze ran an article March 11, 2007 discussing the recent decision by The Community Financial & Services Association of America to spend $10 million for an advertising campaign to educate payday loan users on responsible borrowing.

Jean Ann Fox, director of consumer protection for the Consumer Federation of America says, "This is a public-relations act from an industry under heavy fire. This move is to derail state and congressional legislation."

Don Gayhardt, president of Dollar Financial, said, "If it only cost $10 to bounce a check, I'm not sure we would have nearly as big a payday loan industry."

Clearly payday loans can be very dangerous to your financial well being. Ms. Fox's mission seems to be to help educate consumers so they can make an informed choice.

Is there a place for payday loans? I can see certain circumstances where an online payday loan really is your last and only resort.

If you take a fast payday loan, remember to only borrow what you will be able to pay back when you get paid from your job.

Rolling existing payday loans will make it extremely difficult to get back to even on the debt. Responsibly borrowing is the only way to go

Payday Loan for bad credit is possible

Getting a loan can be tough if you have bad credit. Many lenders make you jump through hoops for a payday advance loan for bad credit, then make you wait days for an answer only to disappoint you with the news that your loan application has been denied.

That can be especially frustrating when you need money right now. That is where payday loan for bad credit comes in. You can get a payday advance loan for bad credit approved online within an hour and have cash in the bank in one business day.

When people have bad credit, compounded with a cash crisis, a payday advance loan for bad credit can be a good solution to the problem.

Even if a person has good credit, it is possible that a financial institution with stricter policies such as a bank will deny a loan application, simply because a person does not have a reliable source of income or cannot provide any valuable collateral.

The New Fast Cash with out a Payday Loan Blog

Great new Squidoo page Fast Cash with out a Payday Loan Online Blog.

These guys talk about their mission at Fast Cash with out a Payday Loan is to help you learn about personal finance.

There are ways to improve your financial situation. Most of the time this is done without the default payday loan usage.

Payday Cash Advance in Just a Few Clicks - Always THE Last resort

When You Should Stay and When You Should Go
A payday cash advance in just a few clicks should be an option used as a last resort to avoid a financial emergency. With its interest rates, only borrow as much cash as you can pay back.

Clearly one of the most difficult aspects of the whole thing is to keep it under control. When you're applying for a payday cash loan, and you know you'll be out of gas before your paycheck comes, it's so tempting to add a few bucks of spending cash to the credit line.

Stop yourself right there. Ask yourself a few questions.

Do I need this cash right now?
Will I spend the cash immediately on something that is necessary?
Can I do without the cash by conserving my resources?
Will I actually use the cash on this excuse, or will I end up blowing it on something stupid?

Can you wait for the extra cash? You usually can. It's nice to have everything you want without waiting for it, but it will save you a lot of cash if you just hold off on the advance until payday.

Will you spend this cash immediately? If you want to advance an extra thirty bucks so you'll have enough to for gas on Friday, you should reconsider. If you know for certain that you'll need it, fill your tank on the way home. Don't carry the extra cash in your pocket, because you're likely to spend it on something else.

Can you find another way to get by? Most of us are surprised by what we can accomplish when we're strapped for cash. Use only half the soap for laundry loads. Buy the cheap hotdogs for supper tomorrow, and reheat last night's meal for tonight. But don't use credit.

The rising cost of living can force you sometimes to overburden your pocket with payday cash advance loans. It may solve financial issues for the time but it delays the inevitable.

Are you really going to spend the money on what you think you're borrowing it for? Cash is hard to hold on to. You know your habits. If you've blown the grocery money at a restaurant before, then don't borrow it.

Don't let the late fees get ya.

You've followed good sense and only borrowed what you needed. You skimped by on as little as possible, and now your pantry and gas tank are empty. You want to stop at the bank, cash your check, and buy a few things before going to the loan company to take care of your advance.

Finally payday has come. When you have your paycheck, go straight out and pay off that loan...every last nickel of it. The hair extensions can wait. Dinner at Chilis can wait. Your only concern should be to get out of the chains of debt.

Want To Be Wealthy? Stay Away From Payday Loans!

A wise man once mentioned five rules to getting yourself financially fit.

1. Stay OUT of debt. You can't grow your financial net worth if you continue to owe.

2. Save something every month and buy solid stocks that pay dividends.

3. Diversify the stocks by industry and always reinvest the dividends and interest.

4. Do not waiver. The key is the consistency.

5. Consider a precious metal such as gold under the assumption that the dollar will continue to weaken.

These are very basic rules for getting your finances under control.

Never, ever, ever take payday loans, without knowing the APR and fees that you are going to be paying. Always remember that rolling existing payday loans can be a disaster financially.

Please remember to always borrow responsibly. If you take a payday loan online, please check out these financial tools to figure out what you can borrow and be able to pay back when you get paid from your job and still have money to get through the month.

A Payday Loan is Last Resort Credit Option!

I ran across a Michelle Singletary article on the Washington Post website which does a fine job of discussing the very tough spot payday loans can put people in. I am pasting a few paragraphs below:

"Payday loans are small loans (usually $ 100 to $ 500) that a borrower promises to repay out of his or her next paycheck, typically in two weeks. Fees charged for payday loans are usually a percentage of the face value of the loan. For example, if someone wanted to borrow $ 500, the fee might be 15 percent ($ 75)."

"Consumer groups complain bitterly that payday loans are an extremely bad deal because they carry high fees that, when annualized, amount to triple-digit interest rates. In many cases, if borrowers cannot repay the loans, they are allowed extensions -- for additional fees. Then they are charged even higher rates of interest."

She goes on to comment about Clark Howard who runs a consumer website and states, "Stay away from 'pay day loans!"

Ms. Singletary goes on to describe Clark's background in the matter: Clark recently had the privilege to testify before a legislative committee that is considering enacting a "pay day loan" statute. 'Pay day loans' are high-risk loans that people take out to tide them over until pay day. They anticipate being able to pay the loan back after pay day. But the interest rates are so high - typically 300 percent and higher – that it starts a vicious cycle and consumers get more into debt each time. These loans have been banned in several states already because they are so damaging and because there are no regulations in the industry. "Clark thinks the marketplace should determine what rates should be, as is the case in the credit card industry. About 17,000 soldiers have taken out pay day loans and, as a result, they could not serve overseas. Taxpayers paid money to train those military personnel and it was basically a waste because the soldiers were too financially strapped to be deployed. If you have taken out these kinds of loans in the past, STOP. If you have family members in the military or in emergency services fields (police and firefighters), find out what kind of loans they've taken out and help them make good choices. We have to watch out for each other when it comes to these kind of loans, which are also known as cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans."

If you remember anything from this article, remember this. Never take a payday loan online without being totally sure that you will be able to pay the entire payday loan plus interest back at the due date. Why? Because rolling existing online payday loans can be a disaster financially. Please always borrow responsibly.

If you apply for payday advance, please only borrow what you will be able to pay back when you get paid from your job and still have money to get through the month.

Default Payday loan interest can exceed 2,000%

Default Payday loan interest can exceed 2,000%

The San Francisco Chronicle ran a default payday loan warning article March 23, 2007. The article discusses the results of a survey by the California Reinvestment Coalition which indicates that many California consumers are receiving misleading information from payday lenders regarding interest rate charges.

Interest rates for payday lenders came in at a 460% average. Charisse Ma Lebron, a coalition spokeswoman, was quoted as saying, California's laws are too lenient, considering that 1.5 million households use this service every year."

According to The San Francisco Chronicle: Mark Thomson, a spokesman for California Financial Service Providers, the trade group for payday lenders, acknowledged that many lenders aren't complying with state disclosure requirements. But he said things are improving. "State regulators have been doing exams (of payday lenders) for about a year and have done about one-third of lenders' locations," Thomson said. "In most cases, the licensees respond that they can fix the problem. In cases where they don't comply, we support strong enforcement by the regulators."

Never, ever, ever take a default payday loan, without knowing the APR and fees that you are going to be paying.Always remember rolling existing payday loans can be a disaster financially. Please always borrow responsibly. If you take a payday loan online, please only borrow what you will be able to pay back when you get paid from your job and still have money to get through the month.

Mayday for Payday Loans

On April 2, 2007 The Wall Street Journal published the following editorial.

Mayday for Payday Loans

In the wake of the subprime loan meltdown, Congress and many statelegislatures are now promising a crackdown on the "payday" loan industry.This looks like another illustration of how to hurt working Americans in thename of helping them.

Payday lenders offer short term loans, typically of between $100 to $500, toworkers who need cash in advance of their next paycheck. Consumer groups andbanking industry critics complain that the fees charged on payday loans are"predatory" and ensnare the poor in a "debt trap." The Center forResponsible Lending, a liberal activist group, claims the industry costsAmericans $4.2 billion a year by charging exorbitant fees.

Several dozen U.S. Congressmen recently signed a letter excoriating paydaylenders as "unscrupulous." Last year, Missouri Republican Jim Talent waslooking for a populist issue to save his Senate seat, so he led the fight inCongress to enact legislation chasing payday lenders from military bases.Mr. Talent still lost, but he helped set a precedent that Democrats arepursuing with more onerous measures now.

But if payday lending is such a consumer rip off, no one has explained whythese stores have become so popular. There are some 25,000 payday storesacross America, and in many small towns the payday loan store is now ascommonplace as the local post office. It has become something like a $6billion industry serving 15 million people every month.

Consumers seem to like the convenience of instant cash in advance of theirpaycheck and prefer this to pawnshops or borrowing money from familymembers. Payday lenders have grown in size, customer base and profitabilityby discovering an unserved niche in the loan market for convenient, shortterm micro-loans. More to the "populist" point, payday loans offer avaluable service to moderate income workers. Most borrowers have incomesbetween $25,000 and $50,000, and payday loans are cheaper than mostalternatives for those facing short-term financial distress.

Critics complain that the annual percentage rate (APR) on a two-week loan of$100 with a $15 fee amounts to a predatory 390%. But the equivalent APR costto the borrower of writing a bounced check can exceed 1,300%, while a creditcard late fee charge can reach 700%. Some borrowers will also go to loansharks as an alternative, and we know how high their "fees" can be.

Georgia outlawed payday loans in 2004, and thousands of workers have sincetaken to traveling over the border to find payday stores in Tennessee,Florida and South Carolina. So the effect of the ban has been to increaseconsumer credit costs and inconvenience for Georgia consumers.

The most common proposals in Congress would cap payday loan interest ratesat 36% APR. This would cut the fee to $1.38 for a $100 loan, less than thecharge for a typical $100 ATM fee, and far below the check transaction cost.This could shut down much of the industry. But to what end? This debate ismuch like the controversy over bank ATM fees a few years ago. Consumer advocates demanded laws capping fees, and where those took effect the resultwas not so much lower charges but fewer ATMs and thus less convenience.

A 2007 New York Federal Reserve Bank study rejects the notion of payday aspredatory and concludes that high prices "may reflect too few paydaylenders, rather than too many." It adds that more regulation could reducemarket entry and "the lack of competition could drive rates higher." Banningpayday loans might please competing banks, credit unions and so-calledconsumer advocates, but it's hard to see how actual consumers would benefit.

This interesting editorial makes the point that payday loans are not necessarily the most expensive alternative out there. This is clearly the reason 15 million people use the service each month. Keep in mind, they didn't say payday loans were cheap. Clearly payday loans are an expensive proposition. Always remember rolling existing payday loans can be a disaster financially.

Please always borrow responsibly. If you take payday loans online, please only borrow what you will be able to pay back when you get paid from your job and still have money to get through the month.

Payday Cash Advance for Bad Credit

Getting a loan can be tough if you have bad credit. Many lenders make you jump through hoops for a payday advance for bad credit, then make you wait days for an answer only to disappoint you with the news that your loan application has been denied. That can be especially frustrating when you need money right now. That is where fast cash loans comes in. You can get a payday advance for bad credit approved online within an hour and have cash in the bank in one business day. When people have bad credit, compounded with a cash crisis, a payday advance for bad credit can be a good solution to the problem. Even if a person has good credit, it is possible that a financial institution with stricter policies such as a bank will deny a loan application, simply because a person does not have a reliable source of income or cannot provide any valuable collateral.

Payday Advance for Bad Credit Emergencies

A payday advance for bad credit can be a useful aide when dealing with short-term cash flow problems caused by an unexpected emergency that stretches your finances to the breaking point. Sudden car repairs, illnesses requiring medical attention or money needed for an unexpected trip are all possibilities you may not be able to budget for in advance. A payday advance for bad credit is not a long-term loan and extra fees can be applied if the loan is rolled over to future paychecks. A payday advance for bad credit is a quick way to get emergency cash easily without a credit check and without faxing. The fees are minimal compared to the compounded ramifications of not paying your bills on time or not being able to get to work because you couldn’t get your car repaired or you simply ran out of gas. Applying online means you can find the right lender for your needs and you can have the cash in your bank account by
tomorrow.

Apply now at payday cash advance online for a fast, convenient, and confidential payday advance for bad credit!

Instant Payday Loan Online Rates Better Than Bank Overdraft Fees?

Payday Loan Rates Better Than Bank Overdraft Fees?

Issac Bailey of the The Sun News in Myrtle Beach, SC offers a different perspective in his March 7, 2007 piece.

Mr. Bailey writes:

They sometimes charge customers an annual percentage rate of 1,040 percent. Of course they need to be run out of town. I'm talking about banks, not the frequently vilified payday lenders.

According to the Consumer Federation of America and The (Columbia) State newspaper, if someone overdrafts an account by $100 and has to pay a fee to the bank and the merchant within a two-week period, which is typical of payday loans, it could amount to a 1,040 APR.

And to think, the S.C. General Assembly, like a growing number of legislative bodies, is up in arms because payday lenders charge customers up to a 390 percent APR.

Legitimate banks allow you to buy a $2 candy bar with your debit card but don't tell you your account has already been overdrawn. And they charge you $20 to $35 for that purchase - even though they can simply decide to not let you make it.

Also, overdraft charges, through bank debit cards, average about $34, according to the Center for Responsible Lending.

People pay an average of $2.17 for every dollar borrowed through such ``loans.'' That's the equivalent of paying $217 for every $100 of mistakes you make while balancing your checkbook.

Legitimate banks charge you for using someone else's ATM to retrieve your own money.

Legitimate banks sometimes raise the interest rate on Credit Card A if you make a late payment on Credit Card B.

Legitimate banks camp out on college campuses and target freshmen who don't have the knowledge or discipline to handle responsibly, let alone the bank account.

An interesting data point that Mr. Bailey reveals comes from the Federal Reserve Bank of New York:

``Using a small set of data, we find that payday loan rates and fees decline significantly as the number of payday lenders and pawnshops increase. Despite their alleged naivete, payday borrowers appear sophisticated enough to shop for lower prices. ... The simple fact that payday lenders have triumphed over pawnshops suggests that payday lending raises household welfare by providing a preferable alternative.''

Mr. Bailey concludes with the obvious, “If you make unwise financial decisions or mistakes or get caught in an emergency, most financial institutions will charge you dearly. Not just payday lenders.”

Always remember rolling existing payday loans can be a disaster financially. Please always borrow responsibly. If you take an instant payday loan online, please only borrow what you will be able to pay back when you get paid from your job and still have money to get through the month.

Payday Cash Advance Lenders Taking Defensive Posture

Payday Lenders Taking Defensive Posture

On February 21st, The Wall Street Journal reports US payday lenders are taking a defensive stance. The payday lending industry is trying to avoid possible legislation by voluntarily limiting advertising and offering once a year breaks to borrowers who rollover loans too frequently.

Community Financial Services Association of America (CFSA) which represents 60% of the payday lenders has plans to alter it member's business practices. These include bans on advertising loans for frivolous purposes such as vacations, entertainment, gambling etc.

The key issue is that payday loans are short term vehicles to help people get through difficult times. You wouldn't take a taxi to drive across the country when you can rent a car. Why would a person take a high fee short term loan for long term purposes?

According to the WSJ, CFSA is going to be hitting the airwaves with a more responsible message. Let's hope people listen. Responsible usage of payday loans is critical to your financial future.

If you find that you are in a bind and are looking for a payday loan, consider Payday Cash Advance Loan. This lender is interesting because it is based in the US and is licensed by one of the states they operate in. You can actually call one of its team members to walk you through an application or you can apply online.

Alternatives to Payday Cash Advance Loans

March 13, 2007 The Chicago Sun-Times ran an editorial related to payday cash advance loans with an interesting perspective.

We all know that payday loans are expensive short term financing alternatives but no one looks at the APR for a $26 late fee on a $100 credit card bill. NSF charges by banks and retailers can be outrageous on returned checks. Additionally, if your utilities get shut off and you have to pay the $50 reconnect fee. What is the APR on that $100 past-due account?

Payday loans may not be the cheapest source of cash but in many circumstances, it can be the cheaper alternative.

If you find that you are in a bind, you are looking for a payday cash advance loan, please borrow responsibly.

Cramer says payday cash loan is better than bouncing checks

Cramer says payday loans are better than bouncing checks

CNBC host Jim Cramer told viewers on his "Mad Money" television program to get long payday lenders Advance America Cash Advance Centers and Cash America International as a way of taking advantage of problems in the subprime-mortgage lending market.

Cramer said, "Even though the rates are high, taking out one of these loans is better than bouncing a check or being late on a credit card or missing a utility bill."

If you take a quick cash loan, please only borrow what you will be able to pay back when you get paid from your job.

Rolling existing payday loans can be a disaster financially. Please always borrow responsibly.

Cash Advance and Fast Cash Loans Blog

Welcome to Payday Loan News Blog

We will be presenting various cash advance and fast cash loans news items to keep you on top of the industry.

If you choose to use expensive short term loans, please borrow only when you are sure you will be paying back the loan balance after getting paid.

Rolling over an existing cash advance can be a major financial mistake. Please always borrow responsibly.