Chapter 7 - Solutions for a Financial Crisis

Since the downturn of the housing market, the United States economy has been floundering – foreclosures and bankruptcy filings are on the rise, the stock market is fluctuating wildly and credit card debt is creeping upward. But those are by no means the only problems faced by American consumers.

Apparently, the tightening of credit from traditional sources like banks has led to increased lending by “non-traditional” or “fringe” lenders like payday lenders and auto-title lenders. Unfortunately, borrowing from sources like these proves extremely expensive for many consumers.

Payday loans are short-term loans advertised to help tide people over until their next payday. Unfortunately, because of the high interest rates and fees associated with most payday loans, many borrowers find themselves plunged into a cycle of debt and even pushed to a point where they’re forced to file bankruptcy.

A recent report from the Wichita Eagle outlines the problem of payday lenders in Kansas. Since 1993, the number of payday loan stores in Kansas has more than quadrupled, according to sources. And, because laws in that state are more permissive than in other parts of the country, the number of payday lenders continues to rise.

In some states, including Pennsylvania, Massachusetts and Oregon, legislation has eliminated or seriously restricted the practice of payday lending. In Virginia, a law to increase tax on payday lenders has been proposed, and elsewhere around the country legislators have moved toward minimizing payday lenders’ power.

Evidently, though, lawmakers in Kansas have yet to hop on board.

Ohio is reportedly plagued by similar growth of payday lenders – it seems more than 75 new payday loan stores have cropped up in the last year, meaning that Ohio now has more payday lenders than fast food restaurants. But the Buckeye State is reportedly addressing the problem of payday lenders very differently than Kansas.

According to the Columbus Dispatch, two bills concerning payday lenders are currently pending in the Ohio House of Representatives. HB 337, backed by the payday lending industry, would offer payday borrowers a one-time extended repayment plan to catch up on their balances.

The other, more borrower-friendly piece of legislation, HB 333, would cap allowable interest rates on payday loans at 36%. Currently, some payday loans can cost borrowers as much as 391% in annual interest. And other Ohio legislators have allegedly announced plans to introduce more laws that would protect consumers from the potentially devastating effects of payday loans.

If you would like a professional opinion about the state of your debt and/or finances, you should consider contacting a bankruptcy lawyer in your area.