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Payday Loans Warning To Borrowers
November 15th, 2011
A debt advice expert urges “don’t rely on payday loans to cover monthly bills”
A stark warning from Liz Chadwick, Chief Executive of Blagdon-based DAWN Advice, comes as it was revealed by Citizens Advice that the number of people facing financial difficulties as a result of payday loans has quadrupled in the past two years. According to Chadwick, the so-called advantages, including no credit checks, instant approvals and payments banked within hours of application, may lure people in without them really considering the bigger picture.
Short-term credit
“Short-term credit may often appear like the easiest and simplest solution to cover bills, like a quick fix, but it may be just a case of papering over the cracks,” she added. If repayment deadlines are missed and debts roll over, the unsettled interest can quickly grow, often spiraling out of control. Payday loans are often linked with exorbitant Annual Percentage Rates (APRs) with some lenders charging interest rates upwards of 4,000 per cent. Although the loans are not intended to provide credit for anywhere near a full year, it is a dangerous cycle which is difficult to break.”
Annual loans
“If a borrower takes on, then pays back, a short-term loan at the end of one month, they will probably need it at the end of the next month, too. Each time they incur costs and slipping further into debt. Instead they should be seeking independent financial advice to prevent their debts from escalating.”
Advice
Anyone who is facing financial hardship or concerned about matters relating to debt can drop in to the DAWN CAB in Morpeth for free and independent advice. For telephone advice contact the Northumberland Advice Line on 0844 4111309.
Limited Payday-Lending Regulation Bills Passed By Senate
May 24th, 2011
On Monday the Texas Senate approved two measures designed to regulate the state’s payday lending industry for the first time, without ending the industry’s controversial lending practices.
A modest step
Sen. John Carona, R-Dallas, said his legislation is a modest step but it will still require more than 3,500 storefront payday offices to obtain a state license and to disclose full information about their fees to customers.
The ‘cycle of debt’
The legislation does not address the so-called ‘cycle of debt’, the period when consumers extend their short-term loans, on average a dozen times, racking up heavier fees. Instead, the measures leave the industry’s fees unregulated. “What we present to you today is the limit of what we could do,” Carona said. “I leave this session disappointed that we’re not able to do more.” There was little real debate in a chamber that was half-empty at times, and Carona urged senators not to offer any amendments.
The Senate approved
The Senate overwhelmingly approved House Bills 2592 and 2594. The votes were 27-3 and 28-2, respectively. The House must approve Senate changes before the measures can go to the governor for ratification. “Amending these delicate bills in any fashion would probably cause it not to pass the House,” Carona warned. Both bills were the result of negotiations between the industry and consumer groups.
Another bill
Sens. Wendy Davis, D-Fort Worth, and Royce West, D-Dallas, had written a bill with tougher regulations, including a cap on fees, but they couldn’t get their colleagues to agree to bring it up for debate. Davis blamed the power of the industry’s lobby for watering down the legislation. She said, “It’s very disappointing. “It makes you lose your faith in democracy.”
Military families
Federal law caps fees to military families at 36 percent a year, but that limit has not been enforced in Texas. Carona’s legislation is supposed to change that, but Davis said the inclusion of installment loans in the new legislation would allow the industry to circumvent that fee cap.
Summarizing
Wendy Davis said, “We’ve actually taken some steps backwards.”
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