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WJTV INVESTIGATES: Payday Loan Company Allegedly Trapping Customers In Debt

Payday loans and cash advances may sound like a good idea when you’re strapped for cash, but if you’re not careful, they could land you in a world financial trouble. It’s no secret that payday loans are known for their extraordinarily high interest rates.<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” /?>

It’s become such a problem that payday loan businesses have been outlawed in 18 states. Currently, the Consumer Federation of America lists the 32 other states, including Mississippi, where high cost payday lending is legal.

According to Mississippi code, payday Lenders can loan up to $500.00 per check, with a term of 30 days, at $20.00-$22.00 in finance charges per $100.00 borrowed.

The finance charge is the same for short-term, 14-day loans, however the APR on those loans is 500 times the original amount of the loan.

Jerry Wilson, Commissioner of the Mississippi Department of Banking and Consumer Finance says that the Payday industry is quote “pretty good about following the law.”

However recent complaints have sparked an investigation by the department into one payday company in particular, All American Check Cashing Inc., which has 51 locations statewide.

It’s prompted the DBCF to order a cease and desist order against All American’s Monthly Lending Program for illegal and unethical practice, alleging the program instructs employees to only accept the interest on a delayed deposit check and further telling employees to illegally roll a check during the middle of each month.

The DBCF claims that All American has been holding the checks of customers who could not pay off their loan debt by the deadline, having them sign up to pay an additional fee, only to later cash their original check.

Tameka Fletcher has used payday loans before to get her through a tight spot, and recalls her own experience with payday lending businesses. She said, “I paid the money along with my interest and got back the next day and realized that they had already cashed a check that I wrote them two weeks before, and I had paid them when I came in to pay it.”

According to the cease and desist order, All American’s monthly lending program focuses on customers who “only receive one income payment per month. This includes those customers receiving one payment (on the 1st or 3rd of each month) from a government benefit program such as Social Security, Medicaid, etc.”

So what does All American Check Cashing have to say about this?

Owner Michael Gray could not be reached for comment, but according to Commissioner Jerry Wilson, his examiners were denied access to All American’s customer files and business records for two days when they asked for them- something Wilson says is unheard of and totally against the law.

We also reached out to Dale Danks Jr., The attorney representing All American, who declined to talk to us, but is quoted in the Clarion Ledger saying, “All American has a policy against accepting a fee only, so if the investigation proves that this was occurring in some locations, All American will do whatever it needs to do to correct that issue.”

If All American Check Cashing Inc. is found to be in violation of the Mississippi Check Cashers Act, the company could lose its license or face a fine.

As for consumers, State Attorney General Jim Hood says people should first try taking out a small loan at a bank. However, the problem still remains, most people that use payday loans don’t have good enough credit to qualify for a small bank loan in the first place.

Attorney General Hood says, “Unfortunately, this industry is working on the poor folks that can’t afford to go to those types of institutions.”

So perhaps the message here is to just say no to Payday loans.

[…]

Check Cashing & Payday Loan Services in the US Industry Market …

New York, NY (PRWEB) February 19, 2014

The Check Cashing and Payday Loan Services industry accounts for nearly a quarter of financial services spending by underbanked consumers. Frozen lending markets caused by the recession expanded the underbanked client pool for industry operators, as a growing number of individuals were unable to access traditional financial product offerings. As such, the industry is predominately countercyclical in nature, with rising unemployment and poverty rates benefiting demand levels substantially. Rather than default on debts, poor or recently laid-off consumers chose to turn to the industry’s unsecured loan products during and subsequent to the recession. Consequently, revenue for the Check Cashing and Payday Loan Services industry is expected to increase at an annualized rate of 2.0% from 2009 to 2014 to reach $ 11.1 billion; this growth includes a 2.2% rise in revenue expected in 2014 alone.

According to The Pew Charitable Trusts, 5.5% of domestic adults have used a payday loan. In general, younger individuals that lack a college degree and generate less than $ 40,000 in annual income are the most likely to rely on payday loans. The average borrower takes out eight loans of $ 375 each and pays $ 520 in interest annually. Moreover, this average borrower is typically indebted for five months out of the year.

According to IBISWorld Industry Analyst Stephen Hoopes, “Given the industry’s reliance on poorer consumers for revenue, regulatory agencies have sought to increase legislation surrounding industry operators, as they view payday loans and check cashing fees as exploitative.” As such, 15 states currently either ban payday loans or cap the annual percentage rate at 36.0%. Furthermore, as national interest rate cap proposals are forecast to intensify, compliance costs are expected to increase, to the detriment of profit margins.

Over the five years to 2019, industry revenue is forecast to increase at a more subdued annualized rate. “Despite rising employment levels, the number of consumers that are structurally unemployed or in poverty is anticipated to remain elevated,” says Hoopes. Moreover, competition from commercial banks that offer similar short-term, high-interest products is expected to fall, given recent decisions by Wells Fargo and US Bank to discontinue these offerings. Yet, external competition is still expected to rise, largely in the form of companies that offer industry products exclusively online. In addition, expected increases in regulation are anticipated to force some industry operators to move geographic locations or close down entirely.

For more information, visit IBISWorld’s Check Cashing and Payday Loan Services industry in the US industry report page.

Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld.

Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189.

IBISWorld industry Report Key Topics

The Check Cashing and Payday Loan Services industry cashes checks, drafts or money orders for the general public. Companies in this industry may also offer payday loans, installment loans and other financial services. Banks and firms that operate exclusively online are excluded.

Industry Performance

Executive Summary

Key External Drivers

Current Performance

Industry Outlook

Industry Life Cycle

Products & Markets

Supply Chain

Products & Services

Major Markets

Globalization & Trade

Business Locations

Competitive Landscape

Market Share Concentration

Key Success Factors

Cost Structure Benchmarks

Barriers to Entry

Major Companies

Operating Conditions

Capital Intensity

Key Statistics

Industry Data

Annual Change

Key Ratios

About IBISWorld Inc.

Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

[…]

Check Cashing & Payday Loan Services in the US Industry Market Research Report Now Available from IBISWorld

Thumbnail

Growth experienced during the recession will be hindered by increasing regulations.

New York, NY (PRWEB) February 19, 2014

The Check Cashing and Payday Loan Services industry accounts for nearly a quarter of financial services spending by underbanked consumers. Frozen lending markets caused by the recession expanded the underbanked client pool for industry operators, as a growing number of individuals were unable to access traditional financial product offerings. As such, the industry is predominately countercyclical in nature, with rising unemployment and poverty rates benefiting demand levels substantially. Rather than default on debts, poor or recently laid-off consumers chose to turn to the industry’s unsecured loan products during and subsequent to the recession. Consequently, revenue for the Check Cashing and Payday Loan Services industry is expected to increase at an annualized rate of 2.0% from 2009 to 2014 to reach $11.1 billion; this growth includes a 2.2% rise in revenue expected in 2014 alone.

According to The Pew Charitable Trusts, 5.5% of domestic adults have used a payday loan. In general, younger individuals that lack a college degree and generate less than $40,000 in annual income are the most likely to rely on payday loans. The average borrower takes out eight loans of $375 each and pays $520 in interest annually. Moreover, this average borrower is typically indebted for five months out of the year.

According to IBISWorld Industry Analyst Stephen Hoopes, “Given the industry’s reliance on poorer consumers for revenue, regulatory agencies have sought to increase legislation surrounding industry operators, as they view payday loans and check cashing fees as exploitative.” As such, 15 states currently either ban payday loans or cap the annual percentage rate at 36.0%. Furthermore, as national interest rate cap proposals are forecast to intensify, compliance costs are expected to increase, to the detriment of profit margins.

Over the five years to 2019, industry revenue is forecast to increase at a more subdued annualized rate. “Despite rising employment levels, the number of consumers that are structurally unemployed or in poverty is anticipated to remain elevated,” says Hoopes. Moreover, competition from commercial banks that offer similar short-term, high-interest products is expected to fall, given recent decisions by Wells Fargo and US Bank to discontinue these offerings. Yet, external competition is still expected to rise, largely in the form of companies that offer industry products exclusively online. In addition, expected increases in regulation are anticipated to force some industry operators to move geographic locations or close down entirely.

For more information, visit IBISWorld’s Check Cashing and Payday Loan Services industry in the US industry report page.

Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld.

Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189.

IBISWorld industry Report Key Topics

The Check Cashing and Payday Loan Services industry cashes checks, drafts or money orders for the general public. Companies in this industry may also offer payday loans, installment loans and other financial services. Banks and firms that operate exclusively online are excluded.

Industry Performance
Executive Summary
Key External Drivers
Current Performance
Industry Outlook
Industry Life Cycle
Products & Markets
Supply Chain
Products & Services
Major Markets
Globalization & Trade
Business Locations
Competitive Landscape
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Major Companies
Operating Conditions
Capital Intensity
Key Statistics
Industry Data
Annual Change
Key Ratios

About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.


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