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Fresno pushes payday loan limits, critics stress financial dangers

FRESNO, Calif. (KFSN) — The Fresno City Council is hoping to limit the spread of payday loan businesses in the city.

A majority of the council approved a plan to require special permits for any new payday loan operation. One goal is to use zoning and land use laws to keep them out of the poorest parts of town.

Critics say they damage the city’s economy by charging huge interest rates that trap financially struggling people in an endless cycle of debt. City regulations will not impact the stores already open.

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66 payday lenders are licensed in the city of Fresno, with seven stores in a half-mile stretch of Kings Canyon Road in Southeast Fresno.

Critics say these payday lenders are targeting the working poor, setting up shop in the parts of Fresno with lower income levels. They say that creates a vicious borrowing cycle. State officials even say payday loans create annual interest rates of about 460 percent.

A recent Pew Research report shows the average payday loan consumer ends up paying nearly double the loan amount, just in fees.

“When it’s all said and done six, seven months later, on average, folks are way further in debt than they were to begin with,” said Faith In Communities Executive Director Andy Levine. “They’re still struggling to get by.”

Levine says he backs the stunning Pew report. Ministers in his group are constantly seeing people running to payday lenders, only to end up worse off.

“It was a clear case of usury, which across our faith traditions and very clear in our faith teachings is immoral and unacceptable,” Levine said.

FIC is one of the lead supporters for stricter regulation of the already 66 payday lenders in Fresno.

Here’s how these loans work in California: all a borrower needs is a source of income and a bank account. You can take out up to $300 per loan, which typically needs to be repaid in two to four weeks. Before walking out the door, with cash in hand, the store keeps 15 percent. That leaves the borrower with $255.

According to Pew Research, if you don’t pay back in time you can pay the average fee of $55 to extend the loan.

The average payday borrower extends for about five months and can end up paying nearly double the loan, more than $500, only in fees. That’s in addition to paying back the actual loan.

A large group of payday loan employees pleaded with Fresno council members Thursday that their industry is already heavily regulated.

“Where do you go when you need extra cash for your child’s medicine, who do you turn to when that unexpected bill arrives at your door,” said Advance America employee Brian Rivera.

Payday lenders also worry strict regulation will send people to borrow online, which they and consumer advocates say can be even more dangerous.

(Copyright ©2013 KFSN-TV/DT. All Rights Reserved.)

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Payday lending: a debt trap

Payday lending: a debt trap

By Barrett Duke – Mar 21, 2013 – comment

The debt trap. Millions of Americans are caught up in it. It’s easy to get in debt and often very hard to get out. This is especially true if you live on the edge of poverty. People on the edge of poverty have very little room for an unexpected expense. So, what do they do when one inevitably occurs? Many turn to payday lenders. And in doing so, they often make their poverty worse.

Listen to the audio of this commentary.

Here’s how it works. A payday lender offers to lend a single mother, say, $500 to help pay for an unexpected expense, like a car repair. He offers a simple deal—repay the loan in two weeks with 15% interest. In other words, when her next paycheck comes in. She can’t afford the loan and doesn’t know how she will repay it, but she needs her car to get to work, her children to daycare, and herself to college. “OK,” she says to herself, “I’ll figure it out in two weeks.” Two weeks come in a hurry, and suddenly she owes $565, the $500 loan plus 15% interest. That’s right, it’s not 15% annual interest. It’s 15% two-week interest.

She goes to the lender and explains her problem. He says, “No problem.” Just pay the interest due and he can extend the loan for two more weeks, at another 15% interest. What choice does she have? She pays the $65 and signs on for another two weeks. You see where this is heading, don’t you? Every two weeks, things are the same, and this woman is now paying out $130 a month on a $500 loan, with no end in sight.

In many states today, this is legal. These so-called businesses are charging an effective 390% annual interest rate, served up in two-week bites of 15%.

Now, many would say that the people who go to these lenders should know better. They should read the fine print more carefully and realize what the actual charges are going to be. They should know they won’t be able to pay back their loan in two weeks. I agree. But, hey, if you are drowning, and someone offers to throw you a rope if you just sign on the dotted line for a little bit of interest, you might accept the deal, too, only to regret it when it’s too late.

Just because people should know better doesn’t mean we should allow such clearly predatory practices to occur. I know, “buyer beware,” but we don’t live by that philosophy in most other areas of life. We have a Food and Drug Administration for a good reason. Unscrupulous people do exist and some will do anything they can to make a few more dollars. I’m glad someone is watching and holding them accountable.

But right now, in many of our states, no one is watching these payday lenders. The result is that vulnerable people are being held captive and paying outrageous amounts of interest on very small loans. Some states have reined in these lenders. Some have capped annual interest rates at 36%. Even 36% is high, but it sure beats 390%. Let me encourage you to check your state’s laws governing payday loans. If your state hasn’t done anything to rein these people in, I hope you will contact your elected officials and demand that they do something to help protect vulnerable people in your communities.

Proverb 22:7 states, “The rich rules over the poor, And the borrower becomes the lender’s slave.” It’s hard to imagine an instance where this is not more true than with predatory payday lenders. Let’s join together and force them to offer their loans to people who need them in a way that treats them with dignity and not simply as an easy mark for ill-gotten profits.

Listen to the audio of this commentary.

Dr. Barrett Duke is Vice President for Public Policy and Research for the Southern Baptist Ethics and Religious Liberty Commission, and also serves as Director of the Commission’s Research Institute of the ERLC. Read more of his work here. He is also a regular contributor to the For Faith and Family radio broadcast.

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Ideas To Help You Undertand Pay Day Loans | ZXZ Foundation

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Should you be concerned with your financial predicament, place your mind relaxed. Online payday loans may help you enhance your finances. You just need to know how better to utilize these lending options to assist you. There are several specifics you have to know before applying for these particular lending options, and here are some tips to help you.

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Should you be trying to get a pay day loan on-line, stay away from getting them from places which do not have very clear contact info on their own site. Plenty of pay day loan organizations are not in the nation, and they can cost exorbitant charges. Ensure you are aware what you are about lending from.

Find out the laws where you live concerning pay day loans. Some loan providers attempt to get away with better rates, penalties, or a variety of charges they they are not lawfully allowed to ask you for. Most people are just happy to the financial loan, and you should not query these things, making it feasible for loan providers to ongoing getting aside together.

If you think that a pay day loan organization is doing you wrong, tend not to be frightened to record these to your status firm. When there are several great pay day loan companies, in addition there are several fakes. To obtain eliminate these bogus companies, the state should be created aware of them.

Avoid creating judgements about pay day loans coming from a place of fear. You could be in the midst of a monetary problems. Think extended, and challenging before you apply for a pay day loan. Recall, you have to pay out it again, as well as curiosity. Ensure it will be easy to achieve that, so you may not make a new problems for yourself.

When trying to get a pay day loan, the loan official require that you provide a authorities granted photo id greeting card or driver’s license, a existing power expenses demonstrating your address along with a recent paycheck stub. The address shown on your own id, power expenses, paycheck stub and private check need to be detailed to the home’s physical address.

Make certain you study all of the small print, before applying for the pay day loan. Many individuals get burnt by pay day loan companies, mainly because they did not study all of the specifics before signing. If you do not fully grasp all of the phrases, question someone you care about who is aware of the fabric to assist you.

To economize towards your pay day loan, consider offering items from home you in no way use any more by means of websites on the internet like craigs list and Amazon . com. Even though you might not believe you have many valuable things to promote, you more than likely do. Check out your book assortment, compact disc assortment, and also other gadgets. Even if you are only able to make a few hundred money, it may continue to help.

While you are picking a organization to get a pay day loan from, there are numerous important things to be aware of. Be sure the corporation is signed up using the status, and follows status rules. You should also seek out any complaints, or court courtroom proceedings towards every organization. Additionally, it adds to their track record if, they have been in operation for a variety of years.

Understand the regulation. Imagine you take out a pay day loan to be repaid with by the next pay out period of time. If you do not spend the money for financial loan again punctually, the financial institution can use how the check you utilized as collateral whether you will have the funds in your bank account or not. Beyond your bounced check charges, you can find states where loan provider can claim three times the quantity of your unique check.

When inspecting the recommended regards to a pay day loan offer you, be sure to see whether you can find any penalties evaluated for prepayment of the financial loan equilibrium. Using this method, it really is possible to steer clear of paying needless curiosity when the money expected to pay back the loan are, received earlier than in the beginning anticipated.

Verify your credit track record prior to deciding to look for a pay day loan. Customers with a healthier credit ranking should be able to find more ideal rates and regards to pay back. If your credit track record is in bad condition, you are likely to pay out rates that happen to be better, and you can not be eligible for an extended financial loan expression.

Will not sit down close to and await a check after you have applied for a pay day loan. Virtually all pay day loan companies sends you your cash to your bank checking account within a day or two through electrical down payment. After this gets deposited, you ought to easily resolve your financial crisis simply because pay day loan phrases are really brief.

When you want money, you might not know the best places to transform. That is a issue everyone has. Fortunately, pay day loans provide you with a opportunity to pay out your bills when you don’t have enough money. Simply use the tips presented right here and research carefully. It will be possible to get again on your own ft . soon.

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Local action on payday lending – Off the Kuff

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Patricia Kilday Hart reports on a promising movement.

Where payday lending comes from

No one was particularly surprised a year ago when the Texas Legislature failed – once again – to pass meaningful regulation of the payday and auto title loan industries. After all, the folks who charge triple digit interest on loans to society’s most desperately poor had invested $3.9 million on a persuasive lobby team to protect business as usual. But the coalition of consumer advocates hoping to de-fang the loan sharks – which included a wide swath of Texas churches – didn’t sit around and sulk.

Instead, the Texas Fair Lending Alliance, teaming up with the interdenominational Texas Faith for Fair Lending, found a way around the Austin lobby juggernaut. Taking a cue from the political axiom that “all politics is local,” they made their case to city councils in Austin and Dallas, which recently passed ordinances protecting their residents from open-ended loans with escalating fees and interest. This week, a San Antonio City Council committee took up the issue. Could Houston be far behind?

Like San Antonio, Dallas and Austin, poor neighborhoods in Houston have little access to banking, leaving a vacuum that the payday lenders have exploited. And really, is there any other word that better describes this business than “exploit?” When debtors can’t pay off their entire loan, they must pay stiff “rollover” fees plus interest. Imagine a family making $200 payments every two weeks for four months – shelling out $1,800 – without making a dent in their principal loan of $700.

That family is not imaginary, but the reason one San Antonio pastor became politically active. As I wrote last year, the family sought financial assistance from the Rev. Chad R. Chaddick’s church. Chaddick came to realize that lots of families obtaining financial assistance from churches were simply handing the cash over to lenders, in many cases, to keep their cars from being repossessed. “Eye-opening,” was how the polite minister described the situation.

Here’s more information about that San Antonio ordinance, which was proposed by City Council member Diego Bernal:

The proposed ordinance would be stronger than a law passed by the Legislature in 2011. That law requires payday lenders to post a fee schedule and submit to state regulation.

Payday lending is banned in at least a dozen states, and others limit loan amounts. In Texas, there’s a cap of 10 percent on annual interest rates, but Bernal said companies have found a loophole by calling themselves “credit-repair agencies,” which aren’t subject to the same limit.

Bernal’s plan has several elements, including limiting payday loans to 20 percent of the borrower’s gross monthly income and limiting auto title loans to the lesser of 3 percent of the borrower’s gross annual income or 70 percent of the vehicle value. He also seeks to require that the loans be limited to no more than four installments or three rollovers or renewals and that the proceeds from each installment or renewal reduce the loan principal by 25 percent.

Now, payday lenders can continually collect interest and fees from customers who can’t pay down the principal.

“You can put yourself into debt in perpetuity,” Bernal said. “And this (proposal) limits that.”

Seems reasonable to me. By the way, here’s how you can tell that the state law that was passed last year – which was still better than nothing, though not nearly as good as it should have been – is going to be inadequate. According to this Express News editorial in favor of Bernal’s proposal, Rick Perry appointed William White, the former head of payday lending giant Cash America, to head the Texas Finance Commission, which is the agency responsible for regulating payday lenders. Remember how well it worked out when Perry appointed one of Bob Perry’s top executives to head the agency that would regulate home builders? It’s like that.

See here and here for more on Bernals’ proposed ordinance, and see the Observer for more on the Texas Fair Lending Alliance. The Alliance released a poll showing broad support for further regulations and limits on payday lending – here’s the press release and the polling memo. Austin and Dallas have already taken some action, both via zoning laws and via similar legislation to Bernal’s. The payday lenders have threatened to sue, but the good guys feel like they’re on solid legal ground. I hope Houston gets in the game soon as well. I share Bernal’s feelings on the matter, as expressed in that last Express News link, a column by Brian Chasnoff:

On Wednesday, after City Council members agreed to draft an ordinance to address the problem locally, Tim Von Kennel explained why the industry opposes Bernal’s efforts.

“We need to have regulation,” said Von Kennel, executive director for Consumer Service Alliance of Texas, an association of payday lenders. “And we’re advocating state regulation over municipal ordinances.”

I’ve already outlined what “state regulation” looks like at the Capitol, where money seeps into cracks and distorts laws.

As for why Von Kennel is averse to “municipal ordinances,” Bernal’s reaction to the circling sharks is enlightening.

I asked the councilman how he responds to lobbyists’ entreaties to consider the perspective of payday lenders.

“How do I say this?” Bernal responded.

He paused for a few seconds, presumably to craft a politic answer.

“I sort of tell them,” he said, “to go (expletive) themselves.”

You’re my kind of guy, CM Bernal. For a non-exploitative alternative to payday lending, see The Slacktivist.

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