I read an article today about the government crack down on the payday lending industry: http://www.jdsupra.com/legalnews/law-enforcers-place-online-payday-lender-87826/?utm_source=LU_Emails
Often I see clients who have gotten caught in the payday loan trap. They borrow one payday loan, only to run into problems making the weekly or monthly payment just to have to borrow yet another payday loan. They are robbing Peter to pay Paul. Many are pointing the finger at the payday loan companies, blaming them for their own irresponsible borrowing.
Albeit, I have first hand knowledge that many payday loan companies regularly violate the FDCPA practically as part of their company policy and I believe protection needs to be afforded the consumer against those practices; however, consumers aren’t walking into these loans blindly. The lenders routinely review the terms of the loans with the borrower, ensuring that everyone understands the sky-high interest rates they pay on these short term loans. Plus, let’s be realistic here: where else can a single working mother with bad credit who makes $15/hr going to be able to borrow $500 to put new tires on her car? When you don’t have friends or family to help financially, who is going to lend to you? Banks are so over-regulated these days that the cost of the processing and tracking of loans of this nature far exceed the benefits. Plus the default rate is huge! Payday lenders have to charge insane interest rates in order to recoup the money lost on defaulted loans.
The bottom line is that payday lending is a business. Yes, it’s a business targeted at poor people. Yes, it’s a business that sometimes takes advantage of those less educated than others. Yes, it’s a business based on lending to people have nowhere else to go to obtain a loan. Yes, it can be a business that preys on people that don’t have a lot of other options. But food stamps don’t pay for diapers. Medicaid doesn’t put gas in your car. And $15/hr may not pay the light bill this month.
I am not saying that these companies are blameless… but at the same time, if a payday loan company truly is the best option in a bad situation – sometimes the only option – what are these people going to do if the government puts the payday lending industry out of business? Where will they go then?
For more information on bankruptcy and related topics, please contact Betsy Lynch, your local Lee’s Summit bankruptcy lawyer at www.abankruptcyfirm.com or 816.434.6616.