News - Poor Credit Payday Loans
Rescuing the prey
June 29, 2008
Today's predatory lenders have two distinct advantages over their shadier forebears: skilled public relations defenders and laws legitimizing their work.
But the toll exacted on the economically vulnerable by these modern-day loan sharks is as harsh as it ever was.
Under the Alabama Deferred Presentment Services Act, which regulates payday lenders, for every $100 borrowed, debtors can expect to pay approximately $17.50 in interest and fees. Borrow $500 today and you'll owe $587.50 two weeks later. Roll that payday loan over 52 weeks and the interest works out to 456 percent.
One person at the mercy of those mean rates is Calhoun County's Wanda Champion, who was profiled in Wednesday's installment of The Star's predatory lending series. After a series of medical problems and other twists of misfortune, Champion had nowhere to turn except predatory lenders. Now she's harassed by collection agencies looking to recoup the thousands of dollars she owes.
The Star's investigation found another problematic state law that doesn't receive as much attention as the one governing payday loans. The Small Loan Act can also trap the poor into crushing debt, as it did in the case of Gregory Rogers, an illiterate Anniston man. The Small Loan law caps interest rates at 36 percent, a figure which only looks good when compared to the astronomical 456 percent allowed by the payday loan law.
Not surprisingly, payday lenders go where the promise of return is highest. In a paper published this spring by Catholic University's Law Review, Christopher Peterson and Steven Graves constructed a map showing the density of payday lenders per 10,000 people.
In Alabama, the density of payday lenders is 2.712 per 10,000. That's the second highest in the nation, just behind Mississippi, with a density of 3.834. Not surprisingly, the Magnolia State's regulation of predatory lending is as lax as Alabama's.
Said differently, according to progressive advocacy group Alabama Arise, our state has more payday lenders than it does McDonald's restaurants.
Source : http://www.annistonstar.com
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