Online PR News – 14-September-2009 – Big banks have entered the fray! Wells Fargo has added cash payday loans to its list of services and the payday loan industry has taken a giant leap forward. Industry watchdogs believe this ground-breaking step will bring respectability to the payday loan industry in general.

With everyone from every level of the economy feeling the pinch of the new recession, we’re all looking for ways to save money and get ahead. Even the big banks, who have added payday loans to their list of services offered their customers. By offering this well-loved product to their checking account customers, big banks like Wells Fargo and U.S. Bancorp are hoping the popularity of the short term loans, already established on the internet with dozens of lenders and companies offering the service online, will allow them to take part in the action too.

Until recently, big banks wouldn’t even consider talking to a customer who didn’t have any collateral, bad credit, or no credit at all. These people were essentially locked out of the traditional personal loan market until payday loans came along.

Payday loans are often taken out by people who need emergency cash right away, and have no other alternative for borrowing. They have no credit and nothing to put down, and the big banks turned them away every time. Although payday loan carries a higher interest rate than a traditional loan, it offers many things a traditional loan cannot. One thing is speed. An online payday loan for up to $1500 can be procured in less than one business day at most online websites that offer payday loans. Not so for a personal loan from a bank. A borrower can get approved for a payday loan with nothing down, and no credit or even bad credit. Not so for a traditional loan from a big bank.

With so many Americans locked out of the loan market, and no end in sight for the demand for quick and easy loans, since cash emergencies pop up for everyone, and at any time, the payday loan industry has grown by leaps and bounds in the past ten years. The demand has been proven.

With proven strong demand for short term loans to high-risk customers, big banks have finally decided to join the market and start offering them to their customers. This is good news for payday loan customers in general, even if they are not Wells Fargo or U.S. Bancorp customers. More players means more competition, and better service for borrowers. As more big banks start offering payday loans, respectability will increase and soon potential borrowers will have even more choices when it comes to getting fast emergency cash before their next payday. Everybody wins!

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By Andrew Housser

Every week, many thousands of Americans take out payday loans — short-term loans that borrowers must pay back when they receive their paycheck. Payday loan shops are big business. But they also can cost uninformed consumers a bundle.

When many people get into a financial bind, they go to a local payday loan establishment and borrow a few hundred dollars. They plan to repay the loan in a week or two, when they’ve got the money. But they pay a huge price. Payday loans can become a dangerous addiction that can cost hundreds or thousands of dollars a year.

Clearly, payday lending is big business in America. Today, there are 22,000 payday advance stores nationwide, lending more than $40 billion in short-term credit (according to the Community Financial Services Association). The typical interest fee on a loan is $15 on a $100 advance, and most loans must be repaid within two weeks.

While payday loans may make economic sense for some people in a few limited instances — such as using them to avoid a substantial late fee or bounced-check fee, or keeping your electricity from being turned off — they can become dependencies that will cost you dearly. To avoid payday loans, use these techniques:

1. Understand the true cost of payday loans

Payday loans can have an annual interest rate of 400 percent. A recent study pointed out what that could mean, in real terms. Over three months, a $300 credit card loan at 16 percent interest would cost $15. A payday loan would cost $270. It is not a good idea to rack up credit card charges that you cannot pay off entirely each month, but that example shows just how costly payday loans can be relative to other forms of credit.

2. Plan your spending

Create a budget that accounts for all income and expenses. Plan funds for every category, and discipline yourself not to spend more. Be sure to devote some amount — even if only a few dollars a week — to saving for unexpected costs.

3. Create an emergency fund

Set aside money you will not touch except in an emergency. Jump-start your fund by brown-bagging lunch, avoiding extras like coffee or CDs, holding a yard sale, or taking on a second job. Put the proceeds in a simple savings account that you will not accidentally empty. It is not a good idea to keep a lot of cash around the house, but if you must keep funds in cash, hide the money well — even from yourself.

4. Avoid payday loan rollovers

The payday loan process can quickly get complicated. Many people “roll over” their loans, borrowing the loan again, rather than repaying it. The Federal Trade Commission has pointed out that the cost of three rollovers on a $100 loan could total $60. Over time, some people wind up giving more than half their incomes to payday lenders.

5. Check into overdraft protection

Many banks offer overdraft protection service that, for a small fee, allows you to clear a check or debit when you don’t have enough funds in your account. It is not ideal, but the cost is much lower than a payday loan.

6. Borrow from a friend or relative

If you just need a few dollars to tide you over, ask for an IOU. However, an unpaid loan can destroy relationships, so don’t use this option unless you know you can pay it back — and borrow only on a rare occasion. Put the agreement in writing, including moderate interest you will pay or a favor you will do in return.

7. Talk to the creditor

If you owe a medical bill, for instance, ask your doctor about making payment arrangements. Most medical providers will work with you to pay the bill in a way you can afford.

8. Get help

If your bills are typically more than you can pay, look into all the options. If necessary, check with a reputable debt settlement firm to help find a way to get your debt under control.

If you find yourself in a tight financial spot, don’t make the problem even more stressful with burdensome interest rates and ongoing debt. With careful planning, you can avoid the payday lender — and find financial freedom.

Source: Rockford Channel 13

By Patrick McEwen
Monday, September 7, 2009 8:00 p.m.

In 1995, the Wisconsin state Legislature repealed their restriction capping at 18 percent permissible interest rates in Wisconsin. This act essentially legalized the “payday loan industry.” Here’s how it works: People can get short-term loans from employers, often only for days or weeks, at exorbitant interest rates well above 100 percent when calculated on an annual percentage basis.

State Rep. Gordon Hintz, D-Oshkosh, is now pushing legislation that would recap Wisconsin interest rates at 36 percent. The new rate cap would be higher than the last, but still low enough to functionally eliminate the payday loan industry.

The motivations behind Hintz’s bill are self-explanatory. Proponents want to prevent predatory lending practices that take advantage of unwary consumers. It’s not hard to discern the primary recipients of payday loans: the working poor. The wealthier, oppositely, either have enough savings to cushion themselves from unforeseen expenses or are able to access alternative forms of credit like credit cards or traditional bank loans. Certainly noone in the top income brackets need take refuge in a payday loan. The working poor, for a myriad of reasons — credit history or lack of steady income, notably — are simply unprofitable as borrowers, regardless of interest rate.

Other than reeking of “government knows best” nanny-statism, the proposed legislation has a couple of issues. There are basically two scenarios that could unfold should this legislation pass. Capping permissible interest rates will either provoke some tax break or other incentive for banks to continue to provide short-term loans at rates below the 36 percent cap. Or it won’t. Each scenario has its flaws and needs to be addressed separately.

Without any short term loan incentives, Hintz’s legislation would essentially make it illegal to give short-term loans to anyone whose financial situation, even given interest rates below 36 percent, makes them likelier to default on a loan. The payday loan industry would be eliminated. This would leave these working poor with no choice besides looking elsewhere to find money for unexpected expenses, such as repairing a car that just broke down. It is not hard to imagine such individuals bouncing a check, borrowing from friends or family or — much worse — turning to illegal black market lenders.

Under this hypothetical situation, the only way Hintz’s legislation makes sense is if we assume payday loans to be the worst of the aforementioned “crisis” options — or more sinisterly, if we assume the working poor aren’t capable of discerning their appropriate financial options. Despite the high costs of payday loans, nobody in the state Legislature is qualified to make that judgment about the working poor. Various policy wonks might be able to prove overdraft costs are lower at some banks, but they cannot assess the financial burden of borrowing money from that crazy uncle nobody likes to deal with. And they are not qualified to assess the impact on someone’s personal life of not being able to get their car fixed in time to be able to get their work and keep their job. For some, the payday loan industry really is a lifeline, however imperfect. And compared with the other lifelines which might emerge in its place, I’d favor the payday loan industry in a heartbeat.

The second possible consequence of Hintz’s legislation would involve coupling the interest rate cap with tax incentives or subsidies to lenders, enabling them to continue providing short-term loans at legal rates to those in sudden financial trouble. While this solves the problem of illicit or even more-problematic financial recourses, it brings about an entirely new set of issues.

Forget for the moment about the interest rate cap and just consider the idea of our government subsidizing loans to the working poor. Do you see a problem here? If there is one universal principle of economics, it’s that whenever you offer money to enable something, more people will always emerge to do that “something.” In this case, giving banks incentives to make payday loans will ensure heavily-increased demand for such loans by the working poor — who will realize, not illogically, that less costly interest rates make payday loans more lucrative for them.

If the goal of Hintz’s legislation is to stop unwary consumers from taking out loans on which they’re sure to default, then providing incentives for people to go into debt in the first place would be incredibly counterproductive. Those who don’t see the inherent flaws in a plan to encourage people to take on unnecessary debt really have not learned anything from the economy of the last two years. Does the term “sub-prime mortgage” sound familiar to anyone?

Arguing “needy families in Wisconsin should not be abandoned to predatory practices most of us would find intolerable,” the Wisconsin Catholic Conference (WCC) is supporting legislative efforts to place stronger regulations on the payday loan industry.

The WCC is asking Catholics and others to support legislation such as Assembly Bill 392, which was introduced last week by over 55 co-sponsors. The proposal prohibits payday lenders from assessing finance charges that exceed 36 percent per year, and would give the Department of Financial Institutions (DFI) the authority to enforce the new regulations. Those who violate the regulations could be subject to fines, imprisonment, or both. Borrowers could also bring suit against violators to recover damages.

WCC Executive Director John Huebscher said that the Conference’s support of efforts to curb payday lending reflects the insights of Catholic groups that work directly with needy families. Catholic Charities agencies in Wisconsin, which offer family financial counseling services, are seeing an alarming rise in the number of individuals seeking their services due to the unregulated nature of the payday loan industry.

“The everyday experience of staff at Catholic Charities and that of parish-based volunteers with the Society of St. Vincent de Paul Councils offer powerful testimony that payday loans impose great hardship on families who already struggle financially,” Huebscher explained. “Their message is loud and clear. Our laws must do more to protect the poor in this area.”

Source: Blogging Blue

A payday loan can help someone through a one-time rough patch. But the amount that must be paid back can multiple fast, with interest rates so high it is impossible to keep up. With the current economy, more and more people are considering using these types of loans, but is it the right choice?

“If you are considering a payday loan or credit loan, do some research,” says Daniel Wesley at creditloan.com, a comprehensive Web site on personal finance. “When used wisely, these types of loans can be a valuable resource.”

How do payday loans work? Wesley explains the application process is very simple and you usually only need proof of employment and a checking account. You then determine the amount you need and write a post-dated check plus lender fees. The lender then gives you that amount and withdraws the amount from your bank account on the next day you get paid.

Sounds simple, but too often these types of loans become an ongoing problem for the borrower. Here is what you need to know to make the right decision about getting a payday loan:

1. Never borrow more than you need
These loans require no collateral, which means that the risk to the lender is very high. This often leads to high interest rates that increase the profit made by the lender. The bottom line is, don’t borrow more than you are able to pay back or you’ll be hit with huge fees. You don’t want to pay double or triple the amount you originally borrowed.

2. Do your research and find a reputable company
Just as you would when you take out an auto or home loan, check around to find the best interest rate for payday loans. Different companies offer different rates and terms. Be aware of hidden fees and penalties and always work with an established, reliable company. When borrowing over the Internet, be especially aware of scam artists.

3. Make a budget for the future
Sometimes emergencies come up and resources like payday loans can help families survive until the next paycheck. But if you find you repeatedly need a cash advance to get through the month, it’s time to set a budget for yourself and stick to it. Compare your spending to your monthly income and cut any unnecessary items to help ensure you don’t get caught owing more money than you make.

4. Deal with debt in the long term
If you continue to have problems with debt, it’s best to develop a plan for paying back what you owe. Contact a credit counseling service to see what options are available. Some will have a cost, so look for a service that is reasonable and will work with you to create a manageable plan.

“Payday loans are great life savers, if you use them sparingly,” comments Wesley. “Be smart about how much money you request so you know you can pay it back. If you continue to have problems, get financial advice from a professional.”

Do not apply for several online payday loan advances at the same time because you will reduce your chances of being accepted by any of them. Payday lenders use the same database and will know that you have made several cash advance applications. This could be misinterpreted and make you an unacceptable risk.

Take the time to evaluate several payday loans if you want, but once you understand the terms and you meet the minimum requirements – go with only one lender and submit only one online payday cash advance application. Lenders like PayCheckToday want your business and will work with you to get your cash ASAP.

You find yourself in an emergency and in need of a fast cash advance. You can’t wait until payday, and you find yourself in need of money to see you through. Forget about the bank, you will never get approved in time. If you do not have a credit card you can get the cash with, a fast cash payday loan company can help you with your short term money crunch. If used wisely, a payday cash advance can be a very logical choice in a bad situation. But before you make a bad decision worse, you need to have all the details.

If you were planning to apply to several cash advance loan companies to get enough money for whatever your reason, then you may be out of luck. Almost all payday loan companies do not allow people to have more than one pay day loan at the same time. They want to make sure they get their money back.

These loan services are meant to be a payday loan. That means that you are borrowing money against your next paycheck. When payday arrives, you should be prepared to pay back the loan in full. Some payday cash companies require that you come in to a store location and pay cash for the check. Such places as Cash Advance America will only allow you to have a check deposited a few times before they revoke your loan privileges. You need to pay attention to the rules at each cash advance company.

While you are paying attention, you will also need to be keeping a careful eye on your incoming money. Do not stretch yourself too thin, in case you find yourself in need of the cash advance again. The more times you take it out, the higher the amount of interest you will pay. They make their money on the interest and love to have repeat customers come in for more advances.

You need to carefully think this through before you take out a cash advance from a payday loan company. Is it really worth the interest just to have the cash right now? Can you make arrangements until you get paid? Only after you have exhausted other means should you think about taking out a loan from one of these lenders. This includes any online cash advance businesses as well. Obviously, your budget is already tight. Do you really want to add another payment on top of all the bills you already have?

Convenience-loan companies offer cash-strapped consumers access to funds, but at a hefty price

By Steve Tarter
of the Journal Star

Travel north on the stretch of University Street between Forrest Hill Avenue and War Memorial Drive and you’ll notice plenty of franchise outlets that don’t dispense fast food.

Convenience loans

The half-dozen stores in this area with names like the Cash Store and TitleMax serve money – fast. Welcome to the convenience-loan industry, where you get money in a hurry.

But that convenience comes at a price, say critics. So-called payday loans come with interest rates that average about 300 percent, according to Illinois Legal Aid.

Uncertain financial times are a contributing factor to the popularity of the payday loan business, said Tim Riggenbach, manager at Associated Bank, 125 N. Jefferson St.

“People are losing faith in the establishment. They see these places and understand they can get money there without thinking about the consequences,” he said.
[Ed. Thank you Mr. Riggenbach for telling us that payday loan borrowers are too stupid to know what they are doing. How much did you say your bank charges for an overdraft?]

“There are options to payday loans. People need to talk to their banker,” said Riggenbach.
[Ed. What are those alternative Mr. Riggenbach? And where are they? Payday loan interest rates are high but I have yet to see anybody complaining about them offering an alternative?}

Keeping people in debt

The growth in the payday loan business prompted action in 2005 from the Illinois Legislature, which capped rates at 36 percent on loans up to 120 days only to see loan companies shift to offering a longer-term loan that escapes state restrictions.

"The object is to keep people in debt. If (convenience loans) were structured to be paid off, the payday loan business model wouldn't work," said Don Carlson, executive director of the Central Illinois Organizing Project, a faith-based consumer advocacy group based in Bloomington.

"To understand the amount of interest (payday loan operations) charge, figure that if you borrow $500 by credit card, you'll pay about $17 in interest if you pay that loan off in six months. With a loan from Advance America, the largest of the payday loan stores, you'll pay $1,000 in interest alone. The rate is 400 percent," he said.

Advance America, based in Spartanburg, S.C., operates about 2,800 stores in 32 states, including five in the Peoria area - two along that stretch on University Street. Calls made to Advance America offices were not returned, nor were calls to other payday loan companies.

Advance America recently announced the closing of all 30 of its outlets in Arkansas following the closing of nine outlets in New Mexico after those states passed regulations "that prevent the company from continuing to operate in an economically viable manner," according to a prepared release.

"We regret that the elimination of a regulated and market-based credit option in Arkansas and New Mexico will, unfortunately, leave tens of thousands of consumers without a simple, sensible and responsible avenue for managing short-term financial challenges," said Advance America CEO Ken Compton.

Carlson thinks that "avenue" should be closed here in Illinois, as well. His group plans a "predatory lending summit" Saturday in Springfield to raise the issue with Illinois legislators.

"We're in a dogfight with the Legislature. We had a bill to close the (payday loan) loopholes that passed the Senate but it stalled in the House," said Carlson.

Convenience-loan outlets are not without influence, he said. The loan industry is one of the biggest financial contributors to political campaigns, he said.

Proliferation in Peoria

The proliferation of payday loan and title loan shops has become a problem, said Peoria City Councilwoman Barbara Van Auken, who earlier this year proposed a moratorium (passed by the council) to regulate the number of loan outlets to regulate the number of loan outlets in the city.

"We've gone from 14 to 29 in the last year alone," said Van Auken, referring to the number of "convenience cash" businesses now operating in Peoria.
[Ed. Title loan stores are not payday loan stores. Critics group them together even though they are entirely different business models because it keeps the water muddy.]

It’s no accident that the convenience-loan outlets locate in a group, said Carlson. “People have to flip loans to afford them,” he said, referring to the practice of taking out one loan to pay another.

“It’s walking distance to go from one to another,” said Carlson.

One of the new convenience-loan outlets on University Street is Cash America, a business that’s also walking distance from a very sound neighborhood, said Van Auken. “Cash America is also a pawn shop that, once licensed, will be able to trade in guns. That poses a daunting problem for a nice neighborhood just 30 feet away,” she said.

Steve Tarter can be reached at 686-3260 or starter@pjstar.com

Source: Journal Star

“I use it to pay bills, my telephone bills, because it’s convenient,” said Van Marie Jackson.

Jackson said she uses check cashing and payday advance services despite high finance rates and
she said more of her friends are doing the same.

From the comfort of your home you can find thousands of cash advance Web sites promising easy money with the click of a mouse. So will people turn to these companies if credit markets seize up? The Vice President of Communications for Ace Cash Express, Eric Norrington, said their customer base is growing.

Payday advance stores are licensed and regulated by the state of Louisiana. Financial experts warn consumers about using online payday advance companies, because some of those sites are managed off-shore in international waters, where there are little or no regulations.

Source: wdsu.com

The online payday loan and cash advance loan are under attack by state regulators who make outlaws of lenders who make loans to the guy with more day than pay. Cash is good, but sometimes a credit line to borrow from is the only way to make ends meets until the next payday. Short term business lending happens all the time as receivables financing.

Those lucky enough to have a friend or a relative to play bank keep under the radar, but even here there is a high interest rate paid in pride and self-respect. The law doesn’t consider the hit on self respect a borrowing charge. Relatives may demand low or no fees but what about the self reliant person who doesn’t want to borrow from relatives or make their personal financial situation somebody else’s ear full? An online payday loan application form doesn’t talk and the net doesn’t gossip about money.

The pay day loan borrower isn’t measuring quality of life as an APR. Maybe it means keeping the lights on or having the car running to get to work on Monday. Yep. Payday lenders only make loans to customers with a regular job and a bank account. Middle America without the high limit credit card or the open home equity line they can go to in an emergency. Should they be denied this cash advance loan service because a state regulator doen’t like the fee they would owe? Who should say that the online payday loan borrower is better off paying $35 to Bank of America for a bounced check fee, or $35 extra to the utility company, than the $35 fee to a pay day lender? Is that the proper role of state government?