In US law, a payday lender can use only the same industry standard collection practices used to collect other debts, specifically standards listed under the Fair Debt Collection Practices Act (FDCPA). The FDCPA prohibits debt collectors from using abusive, unfair, and deceptive practices to collect from debtors. Such practices include calling before 8 o’clock in the morning or after 9 o’clock at night, or calling debtors at work.
Jump up ^ Choplin, Jessica; Stark, Debra; Ahmad, Jasmine (2011). “A Psychological Investigation of Consumer Vulnerability to Fraud: Legal and Policy Implication”. Hein Online. pp. 61–108. Retrieved 2017-12-09.
DEYOUNG: If we take an objective look at the folks who use payday lending, what we find is that most users of the product are very satisfied with the product. Survey results show that almost 90 percent of users of the product say that they’re either somewhat satisfied or very satisfied with the product afterwards.
They’re called payday loans because payday is typically when borrowers can pay them back. They’re usually small, short-term loans that can tie you over in an emergency. The interest rates, on an annualized basis, can be in the neighborhood of 400 percent — much, much higher than even the most expensive credit cards. But again, they’re meant to be short-term loans, so you’re not supposed to get anywhere near that annualized rate. Unless, of course, you do. Because if you can’t pay off your payday loan, you might take out another one — a rollover, it’s called. This can get really expensive. Really, really, really expensive — so much so that some people think payday loans are just evil. This guy, for instance:
The propensity for very low default rates seems to be an incentive for investors interested in payday lenders. In the Advance America 10-k SEC filing from December 2011 they note that their agreement with investors, “limits the average of actual charge-offs incurred during each fiscal month to a maximum of 4.50% of the average amount of adjusted transaction receivables outstanding at the end of each fiscal month during the prior twelve consecutive months”. They go on to note that for 2011 their average monthly receivables were $287.1 million and their average charge-off was $9.3 million, or 3.2%. In comparison with traditional lenders, payday firms also save on costs by not engaging in traditional forms of underwriting, relying on their easy rollover terms and the small size of each individual loan as method of diversification eliminating the need for verifying each borrowers ability to repay. It is perhaps due to this that payday lenders rarely exhibit any real effort to verify that the borrower will be able to pay the principal on their payday in addition to their other debt obligations.
Petru Stelian Stoianovici, a researcher from Charles River Associates, and Michael T. Maloney, an economics professor from Clemson University, found “no empirical evidence that payday lending leads to more bankruptcy filings, which casts doubt on the debt trap argument against payday lending.”
If you have concerns about taking a payday loan, don’t worry. Check ‘n Go is an industry leader and a founding member of the Community Financial Services Association, which promotes responsible lending practices and monitors consumer protection. And we’ll be here for you every step of the process. Our customer service representatives are ready to help when you need it.
The Trump administration’s deregulatory mania is proceeding so quickly it’s sometimes tough to keep track of. Mulvaney is just another foot soldier for Trump’s ideological agenda, part of an ongoing campaign to dismantle regulations and defund agencies as a way of attacking financial safeguards, civil rights, and labor protections across government.
CHICAGO—Americans hear a lot these days about the country’s urban-rural divide. Rural counties are poorer; urban ones richer. Rural areas are losing jobs; urban ones are gaining them. People with a college education are leaving rural areas. They’re moving to urban places.
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What our producer learned was that while Ronald Mann did create the survey, it was actually administered by a survey firm. And that firm had been hired by the chairman of a group called the Consumer Credit Research Foundation, or CCRF, which is funded by payday lenders. Now, to be clear, Ronald Mann says that CCRF did not pay him to do the study, and did not attempt to influence his findings; but nor does his paper disclose that the data collection was handled by an industry-funded group. So we went back to Bob DeYoung and asked whether, maybe, it should have.
A payday loan is a short-term loan for an unexpected expense and is typically due on your next payday. Applying is fast and secure. In a few simple steps, payday loans can stretch your budget till your next payday by offering access to the cash you need now.
ZINMAN: The Pentagon in recent years has made it a big policy issue. They have posited that having very ready access to payday loans outside of bases has caused financial distress and distractions that have contributed to declines in military readiness and job performance.
We’ve been asking a pretty simple question today: are payday loans as evil as their critics say or overall, are they pretty useful? But even such a simple question can be hard to answer, especially when so many of the parties involved have incentive to twist the argument, and even the data, in their favor. At least the academic research we’ve been hearing about is totally unbiased, right?
Some payday loan companies gather your personal information and then shop around for a lender. That means your information could go out to third parties as part of the lending process. Other companies will even sell contact information, leaving you dealing with sales calls and spam emails. LendUp protects customer information and will never sell it.
One problem with the payday-lending industry—for regulators, for lenders, for the public interest—is that it defies simple economic intuition. For instance, in most industries, more competition means lower prices for consumers. That maxim surely helped guide the deregulation of the fringe lending business in the 1990s—and some advocates still believe that further deregulation is the key to making payday loans affordable. Yet there’s little evidence that a proliferation of payday lenders produces this consumer-friendly competitive effect. Quite the contrary: While states with no interest-rate limits do have more competition—there are more stores—borrowers in those states (Idaho, South Dakota, Texas, and Wisconsin) pay the highest prices in the country, more than double those paid by residents of some other states, according to Pew. In states where the interest rate is capped, the rate that payday lenders charge gravitates right toward the cap. “Instead of a race to the lowest rates, it’s a race to the highest rates,” says Tom Feltner, the director of financial services at the Consumer Federation of America.
In the event that the post-dated check you provided to the payday lender does not clear the bank and you default on the loan, your credit score could take a hit, unless you have another source of funds available (or arrange a payment plan or extension) to cover the balance. Defaulting on a loan often results in the debt being sold to a collection agency and reported to each of the three credit bureaus. Some lenders even go as far as filing lawsuits, which will also show up in the public records section of your credit report if the judge rules in their favor.
Below is a transcript of the episode, modified for your reading pleasure. For more information on the people and ideas in the episode, see the links at the bottom of this post. And you’ll find credits for the music in the episode noted within the transcript.
Check `n Go currently operates online in: Alabama, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Kansas, Maine, Michigan, Mississippi, Missouri, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Texas, Utah, Wisconsin, and Wyoming.
We have simplified the online loan application process to make it fast and easy for you to apply for the cash advance you need. In fact, you can complete the application online in minutes and get an instant decision.
Standard service cash advances submitted and approved will be transmitted to your bank by the next banking day (this excludes weekends and bank holidays). If you request a standard payday loan from your lender you should receive the money the following banking day. Normally, loan requests receive Monday through Friday, will arrive at your bank the following day. Loan requests received on Friday will arrive on the following Monday (excluding holidays). If you request a standard payday loan on a Saturday or Sunday, you should receive the money on the following Tuesday.
Last year the Consumer Financial Protection Bureau (CFPB) crafted a long-awaited rule on payday lending—the industry offering short-term loans that exploit poor consumers—to clamp down on fraud by forcing lenders to “reasonably determine that the consumer has the ability to repay the loan” (rather than defaulting or submitting to even more exploitative terms). The rule, spearheaded by the Obama administration and widely supported by consumer and public-interest groups, allowed exemptions for smaller-scale loans by requiring lenders to follow certain consumer-protection provisions rather than go through the “ability-to-pay” determination.
WINCY COLLINS: I advise everyone, “Do not even mess with those people. They are rip-offs.” I wouldn’t dare go back again. I don’t even like walking across the street past it. That’s just how pissed I was, and so hurt.
In the traditional retail model, borrowers visit a payday lending store and secure a small cash loan, with payment due in full at the borrower’s next paycheck. The borrower writes a postdated check to the lender in the full amount of the loan plus fees. On the maturity date, the borrower is expected to return to the store to repay the loan in person. If the borrower does not repay the loan in person, the lender may redeem the check. If the account is short on funds to cover the check, the borrower may now face a bounced check fee from their bank in addition to the costs of the loan, and the loan may incur additional fees or an increased interest rate (or both) as a result of the failure to pay.
Don’t hide from bad news. Don’t ignore a lawsuit summons or other notices from a court or the lender, or any court proceedings against you. If you ignore a lawsuit, you may lose the opportunity to fight a wage or bank garnishment.
Freakonomics Radio is produced by WNYC Studios and Dubner Productions. Today’s episode was produced by Christopher Werth. The rest of our staff includes Arwa Gunja, Jay Cowit, Merritt Jacob, Greg Rosalsky, Kasia Mychajlowycz, Alison Hockenberry and Caroline English. Thanks also to Bill Healy for his help with this episode from Chicago. If you want more Freakonomics Radio, you can also find us on Twitter and Facebook and don’t forget to subscribe to this podcast on iTunes or wherever else you get your free, weekly podcasts.
Consider a study that Zinman published a few years back. It looked at what happened in Oregon after that state capped interest rates on short-term loans from the usual 400 percent to 150 percent, which meant a payday lender could no longer charge the industry average of roughly $15 per $100 borrowed; now they could charge only about $6. As an economist might predict, if the financial incentive to sell a product is severely curtailed, people will stop selling the product.
2. Loan funding requires verification of application information. Depending on ability to verify this information, loan funding may be extended up to two days. All loans subject to approval pursuant to standard underwriting criteria. In-store cash pickup is subject to approval pursuant to standard underwriting criteria. In-store cash pickup not available in all states.
Check `n Go Online is not a direct lender in Texas and Ohio, where instead it acts in the capacity as a Credit Services Organization in conjunction with NCP Finance Limited Partnership as the direct lender for both in-store and online loans. Integrity Texas Funding also acts a direct lender in Texas for in-store loans only.
That makes plenty of sense in theory. Payday lending in its most unfettered form seems to be ideal for neither consumers nor lenders. As Luigi Zingales, a professor at the University of Chicago, told a group of finance professionals in a speech last year, “The efficient outcome cannot be achieved without mandatory regulation.” One controversy is whether the bureau, in its zeal to protect consumers, is going too far. Under the plan it is now considering, lenders would have to make sure that borrowers can repay their loans and cover other living expenses without extensive defaults or reborrowing. These actions would indeed seem to curtail the possibility of people falling into debt traps with payday lenders. But the industry argues that the rules would put it out of business. And while a self-serving howl of pain is precisely what you’d expect from any industry under government fire, this appears, based on the business model, to be true—not only would the regulations eliminate the very loans from which the industry makes its money, but they would also introduce significant new underwriting expenses on every loan.
After your information has been submitted, you can receive an offer from one of the lenders in our network. Please take the time to review the offer carefully — including all of the costs and terms — before making your final decision.
SEBASTIAN McKAMEY: It’s open. It’s outside. So I was just standing outside, waiting on the bus stop. And I lit me a cigarette and the officers pulled up on me and was like, “Hey, you know you can’t smoke here?” I was like, “No, I didn’t know. I don’t see no signs.” So they wrote me a ticket.