Predatory Signs of Payday Lending


Predatory Payday Lending


Payday lending carries 400% annual interest rates, and flips borrowers into a debt trap that can go on for weeks, months, or years. These signs will help consumers identify predatory payday loans by their features.


SIGN 1


TRIPLE-DIGIT INTEREST RATES

Payday lenders often express the cost of their loans as fees. For example, a payday loan may cost $15 per $100 loan for a two-week period. This equates to an annual interest rate of 390%. Requiring repayment of the full loan in a short period of time, plus the fee, usually forces the borrower to take out back-to-back loans.




SIGN 2


SHORT-TERM DUE DATE

Payday loans are due in full on the borrower’s next payday, often two weeks, sometimes one week or a month. This catches most borrowers in a cycle of repeat loans that put them in a worse financial position than when they first borrowed.



SIGN 3


BANK ACCOUNT FUNDS AT RISK

Payday lenders secure their loans by holding the borrower’s signed personal check for the amount of the loan plus the fee, or by accessing the borrower’s bank account electronically. If the borrower does not pay off the loan when its due, the lender can deposit the borrower’s check, causing bounced check fees, which can lead to closed bank accounts.



SIGN 4


CYCLE OF DEBT

Payday borrowers frequently end up in a cycle of long-term, high-cost debt. Payday borrowers have an average nine loans per year from one lender, and most are taken shortly after the previous is closed and before the borrower’s next payday.



More Ways to Share

Powerpoint
Presentation
Download the Powerpoint Presentation.