They are quick, easy and oh so convenient! Payday loans are a legal form of predatory lending and is in very simple terms loan sharking.
In some states payday loans and internet loans are illegal. Unfortunately, overall the federal and state governments do very little regarding regulation and enforcement of the laws which may already be in place. As a result millions of unregulated and illegal loans are given out especially over the internet every year.
Consumers should be aware of internet payday loans. The internet in many ways is the Wild Wild West and remains for the most part unregulated. Many of my clients come to me with multiple payday loans all from different lenders. My clients usually do not know who they borrowed money from and when they go back to find out, they find they are chasing a ghost. Most payday loan/fast cash websites do not have addresses listed so it becomes impossible to notice them when my client files for bankruptcy. It also can make it next to impossible to protect my client from harassing phone calls for a while after filing bankruptcy.
The Center for Responsible Lending says the average payday loan borrower makes nine repeat $300 loans per year, at an average of $50 each time the loan is flipped, costing them $450 — more than the original $300 borrowed. The Center for Responsible Lending has informative fast facts on payday loans which every consumer should read if they are considering a payday loan.
The National Consumer Law Center says “taking out a payday loan increases the likelihood that the borrower will lose a bank account, file for bankruptcy, be subject to eviction, delay medical care, face a utility cutoff, and become delinquent on a credit card.”
The Mississippi Center for Justice has a very informative video which explains why payday loans are so predatory and how the loans actually work.
The Center for Responsible Lending has a great short educational video which shows the basic math of a payday loan.
Consumers take out these loans because of desperate situations and should really know the facts first.