Consumer Blog
422% APR? Time to reform the payday loan industry
There are now more than 1500 payday loan stores in Missouri. You probably live near one — or several.
There's a reason this industry is growing so fast — Missouri has some of the weakest consumer protection laws in the country. Attorney General Nixon this week renewed his call for tighter regulations. The numbers are staggering. Consider:
- Average annual percentage rate on a payday loan in Missouri is 422%
- Missourians paid $300 million dollars just in fees and interest on payday loans in a recent one-year period. That puts us second in the nation, behind only California in terms of raw dollars.
- Missouri allows up to six renewals of loans. This allows a maximum APR of 1,950%.
The A.G. calls this legalized loan sharking. Nationally, these lenders set up shop in minority communities and near military bases. In other words, they go where the low-income communities are. If you're ever in the St. Robert area, check out the number of stores around nearby Fort Leonard Wood. Rich people don't take out payday loans. So the people paying the most outrageous fees are those who can least afford it.
Technorati Tags: APR, debt, federal payday loan law, payday loan, payday loan APR, payday loan complaints, payday loan law, payday loans, moagoconsumer, consumer protection
Posted by on February 8, 2007 11:40 am :: Comments (10) :: Permalink
10 Responses to "422% APR? Time to reform the payday loan industry"
says:
February 8, 2007 5:07 pm
i have over five payday loans that i owe. Where can i find help. I want to pay them, but i am so much behind i don't know what to do.
says:
September 19, 2007 7:31 pm
Payday loans are predatory in nature. This is discussed in more detail at www.creditloan.com. See The Booby Trap Called Payday Loans
says:
December 3, 2007 6:03 pm
i have a payday loan and was informed today that in november 07 i was to pay it off in full or i could switch to the rollover plan which was a $250 min with a 100% rate and if i chose to pay it off within 130 days that my name would be in a database on the internet with my personal info and social security number displayed is this legal i live in the state of new mexico this does not seem right to me i owe $105 and why would i want to have them pay it off and borrow $250 and pay them 100%interest which would be $500 what gives them the right to put my ssi # on the internet
says:
February 6, 2008 12:03 pm
help paydays are eating me up cannt pay,iam a fraid they send my check to the bank make be over drafe who can me.
says:
February 6, 2008 12:09 pm
help payday loan messing my life up no ons what to do bank rupty want help us any,what do now.
says:
February 8, 2008 10:34 am
To Randy:
You can file a consumer complaint with our office. Payday loan companies will often negotiate the amount due in these situations.
says:
June 1, 2008 4:33 pm
As far as the military loans, we rdo not give loans to any military associated person. We have a low interest rate not 422% we do have alot of repeats however.
says:
October 27, 2008 12:23 pm
I am compelled to to speak in defense of the payday loan industry. The story is always the same no matter where you hear it and is only half told. The high interest rates when given as an annual percentage rate are astronomical and is a political ploy to close free enterprise financial businesses. In the above example for instance the APR is stated as 422% yet the length of term for the loan is never even mentioned. You will rarely find a payday loan longer than two weeks in term. For instance in the example above that would translate into about a $35 dollar fee for borrowing $100. I would agree to the allegations that a thirty five percent interest fee is a steep price to pay for any loan however considering the low qualification criteria and the time frame in which they can get the average individual a loan, this would be expected with any institution. In fact the company is assuming more risk than the client in my opinion. The facts are simple regardless of the interest rates involved. Payday loans offer a valuable service to consumers who are faced with an immediate cash emergency. You cannot penalize these companies for the irresponsibility of the borrower, and if your a consumer and you don't like the rates payday loan companies are charging, then don't use their services! To borrow more than you can afford to payback is not only irresponsible, but to then blame the service you were provided because of your self afflicted debt is ludicrous. Furthermore, individuals in the industry that may loose their job as a result of such legislation, well, that is simply unjust. We can't penalize business and industry for the irresponsibility of their clients with their services.
says:
November 11, 2008 5:27 pm
The APR these politicians throw around is just that, Annual. With a maximum term of 30 days how does an annual percentage rate come into play. I work in this industry and for every testemonial about getting trapped in a "cycle of debt" I can give you 5 that say thank god you are here. If you borrow $200.00 to make it a week until your next payday the interest would be $15.00. Compare that to overdraft charges, missing work, taking a cab to work, going without heat for a week in the dead of winter. The majority of people who use our services do so responsibly and for very similiar reasons as listed above. No one is being deceived or misled. Our terms are very clearly displayed in our office and very clearly explained to the borrower prior to closing the loan. I can only speak for our company and undoubtedly there are "unscrupulous" lenders out there. The Division of Finance audits every payday loan store on a yearly basis and can easily point out those who are not following state law. These lenders should be dealt with on a case by case basis rather than shutting down an enire industry and simultaneously putting 3000+ Missourians out of work.
