139 Percent Interest Rate?! Crushing Quick-Loan Rates Turn $2,500 Debt to Nearly $14K

August 12, 2013
Detroit Free Press  
payday lending news

Many online lenders advertise fast cash that promises to solve consumers' problems but usually creates new ones instead. One example is Patricia Guy, who will have to pay $11,412.12 in interest over four years for a $2,525 loan from online lender Western Sky. She took out the loan in February and has already paid more than $1,500, at a rate that amounts to 139.13 percent annually. Another $294.46 is scheduled for withdrawal from her credit union account next month, from her monthly Social Security payment and pension. The Michigan Department of Insurance and Financial Services is attempting to keep Western Sky from conducting business in the state, with a hearing scheduled for Sept. 24. The firm's website includes a “See Our Rate Table” section, showing that a loan of $5,075 could be repaid in 84 payments of $486.58 each. The actual calculation, however, works out to a grand total of more than $40,000. Michigan regulators claim that Western Sky, not properly licensed to make loans, is charging 14 times the legal limit in fees. There, the maximum payday transaction amount allowed is $600 and the top fee on that amount is about $76, with a maximum term is 31 days. Regulators in New Hampshire, Georgia, Maryland, and Minnesota are taking action against the lender as well. Western Sky Financial, which claims to operate on the Cheyenne River Indian Reservation in Timber Lake, S.D., insists it “abides by all applicable Federal Indian Law and Tribe regulations.”
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