Hidden Agendas: Payday Loan Industry Deceit
This recent MSNBC financial article exposes a worrying link between one self-described financial literacy education site and the payday loan industry.
The Web site in question, Econ4u.org, describes itself as teaching “important economic concepts” and gearing itself toward younger Americans in order to “pique young people’s interest to learn more about topics that affect them every day.”
Ulterior Motives?
And, at first glance, that’s what the site appears to do.
But here’ s what’s going on at Econ4u.org and why some people are concerned:
- Econ4u’s services are marketed mainly in the Washington, D.C. area, by multiple-choice quiz questions on subway walls.
- Most information about payday loans on the Econ4u.org website portrays the risky short-term loans as positive rather than dangerous.
- The site’s creator is Rick Berman, a D.C. lobbyist infamous for supporting the tobacco and alcohol industries.
- The site has appeared at a time when Congress is considering legislation that would limit and restrict the American payday loan industry.
Payday Loans Versus Abusive Overdraft Loans
Apparently, Berman himself has admitted that his site isn’t unbiased – rather, it reflects his personal beliefs about what economic problems are threatening American consumers.
And it seems he’s more concerned with combating abusive overdraft loans – possibly because he has a financial interest in payday loans.
What’s the Difference?
Abusive Overdraft Loans: These are “fees” or “penalties” charged by banks when consumers bounce a check or overdraw an account with a debit card.
These are, in fact, expensive – the average overdraft fee is $35, regardless the amount of the purchase made.
But wait: Many banks will waive an overdraft fee the first time you incur it, offer you the choice of canceling a transaction that would cause you to overdraw your account, and allow you to link your checking and savings accounts to prevent overdrafts. You just have to ask.
Payday Loans: These are short-term, high-interest loans made to those who may not qualify for loans from traditional lenders.
Theoretically, payday loans cost between $15 – $30 per $100 borrowed.
But wait: Many consumers who borrow money from payday lenders are unable to repay the loan after the first payment period, meaning that their interest is compounded over and over. After a year, interest on a payday loan can be as much as 390 percent or more.
Take-Home Lesson: Get a Second Opinion
The vast majority of consumer advocacy groups do not support payday loans.
True, they aren’t the only risky financial option out there, but they’re often far more trouble – and more money – than they’re worth.
In fact, high payday loan debt is one reason why some folks file Chapter 7 bankruptcy.
Are You Suffering From High Payday Loan Debt?
If you can’t get out of the payday loan cycle, Chapter 7 bankruptcy may be an option for you.
Chapter 7 bankruptcy was designed to eliminate unsecured debt like payday loans and credit card bills.
Talk to a Chapter 7 bankruptcy attorney for more information.