Payday Lenders Taking Advantage of Poor Economy
With the weak economy in the United States, payday and auto-title lenders have wasted no time expanding their businesses to prey on people who are having a had time financially. There are more Americans in financial crisis now than there have been in many years, so these lenders are taking advantage of the opportunity that the poor economy has given them.
These types of high-interest loans are usually avoided by all but the most desperate people in the direst circumstances. The loans are easy to get, easy to fall behind on and can be outrageously expensive to pay off. Some people take out payday or auto-title loans when they have nowhere else to turn. Then, when their situations do not improve they often take out another payday loan to cover the first one and the amount of debt can quickly snowball. For people on the brink of bankruptcy, these loans with interest rates as high as 391 percent often become so overwhelming that they are a deciding factor in the bankruptcy filing.
According to a recent article in The Wichita Eagle, the number of payday lenders in Kansas has grown exponentially in recent years from 53 statewide in 1993 to 436 in 2006 and that number continues to grow. While some states have passed laws to limit the amount of interest payday lenders can charge consumers or shut them down completely, lawmakers in Kansas seem to feel as though it is not the state's responsibility to babysit consumer's checkbooks or monitor their financial decisions. Laws in Kansas regulating high interest lending facilities lag behind laws of other states and they are slow to introduce new legislation. In the meantime, more people in Kansas are sinking deeper into debt and inching closer to filing bankruptcy each day.
In Ohio there are also reports of payday lending facilities expanding at a breakneck speed. A reported 75 new payday lending stores have opened in Ohio in the past year and the number of payday lending facilities outnumber fast food restaurants in the state.
Ohio differs from Kansas in that legislators in Ohio seem to be concerned about the growing number of these high-interest lenders popping up and now have two bills pending in the Ohio House of Representatives.
The Columbus Dispatch reported that one of the bills in Ohio is backed by the payday lending industry. Although that seems a bit like letting a fox loose in a hen house, the bill does have a fraction of merit. Ohio's HB 337 would not lower the maximum interest rate on payday loans but would offer consumers a one time extended payment plan to repay the loans.
The other bill, Ohio HB 333, is a lot better. This bill would lower the maximum annual percentage rate from 391 percent down to 36 percent.
Additionally, two senators in Ohio say that they will introduce their own legislation in the form of a co-sponsored bill regarding payday lenders to get things moving in the right direction. Perhaps at some point lawmakers in Kansas will take their lead and begin to regulate the practices of their high-interest lenders.