Steer Clear of Payday Lenders!

You’ve seen the ads. “BAD CREDIT, NO CREDIT, BANKRUPTCY . . . WE CAN LEND YOU CASH ON THE SPOT!” There seem to be more and more lending establishments that will lend cash-strapped consumers money in exchange for a postdated check or a regular check they agree to hold until the borrower’s next payday. But the sad fact is, these companies charge exorbitant rates, fees and other charges the average consumer would walk away from.

The nonprofit Center for Responsible Lending looked into the problem and found that, the annual percentage rates for payday loans typically ranged between 391% and 443%. No wonder the Consumer Federation of America has called this practice “the modern day equivalent of ‘loan-sharking.’”

When a person who’s living from paycheck to paycheck takes out a loan as costly as the average payday loan, it can be hard for them to avoid getting trapped into an endless cycle of borrowing. And that is exactly what payday lenders count on.

Business is good and getting better for payday lenders. The Center for Responsible Lending’s study reported that payday loans were costing borrowers $3.4 billion a year. That cost is growing as the market expands. It’s reached the point where, as NAACP board chairman Julian Bond observed, payday lenders “open their doors in low-income neighborhoods at a rate equal to Starbucks opening in affluent ones.”

The State of Maryland, like 13 other states, has outlawed payday loans altogether. Payday lenders are still allowed to do business in Delaware, however.

If you need to borrow some money, don’t get ripped off by a payday lender. Turn to your credit union. That’s why they’re here.