House bill would limit payday loans

[longnecker]

All John Chillingsworth wanted after his divorce in 2010 was for his two daughters, ages 7 and 8, to have a happy Christmas.

But the divorce left the account representative with his home in foreclosure, his credit in ruins and no money for gifts. He tried to get aloan for Christmas presents from the credit union he had been a member of since he was 10 years old, but was told that with his tattered credit there was no way.
Seeing no other option, Chillingsworth turned to a payday lender and was able to buy his daughters presents with a $500 loan, to be repaid when his next paycheck arrived, plus about $125 in interest and fees.
Though the loan was supposed to be paid off in two weeks, it carried an annual percentage rate of 651 percent, Chillingsworth said.
When payday came, Chillingsworth was able to make only the minimum payment, which covered the interest but didn't do anything to pay down the principal he used to buy his daughters an American Girl Doll, a Nintendo DS video console, clothes and hair clips.
Months later, he was still making minimum payments and rolling over the balance of his Christmas loan after each two-week cycle, hoping that one day he would have enough cash to wipe out the debt.
Then, Chillingsworth's car needed new tires, and he again turned to a payday loan operator.
Now he was paying about $260 in interest and fees every payday, with little ability to chip away at the principal.
"That started the hole," he said. "I felt like my back was against the wall."
Chillingsworth's story is common among those who have turned to payday lenders for emergency cash.
Annual percentage rates on payday loans commonly run in excess of 500 percent, and while some states cap short-term APRs at about 36 percent, Delaware imposes no limits on what interest rates banks, credit card companies and short-term lenders can charge.
Lending industry group Community Financial Services Association of America reports as many as 19 million households use payday lending each year.
Critics of such lenders say Chillingsworth was sucked into a seemingly endless cycle of debt by an industry that makes its profits not from customers who repay their debts on time and in full, but from borrowers who can afford to pay only the interest and fees every other week. Read full (long) article
http://www.delawareonline.com/articl...nclick_check=1

[EpicWin]

All John Chillingsworth wanted after his divorce in 2010 was for his two daughters, ages 7 and 8, to have a happy Christmas.

But the divorce left the account representative with his home in foreclosure, his credit in ruins and no money for gifts. He tried to get aloan for Christmas presents from the credit union he had been a member of since he was 10 years old, but was told that with his tattered credit there was no way.
Seeing no other option, Chillingsworth turned to a payday lender and was able to buy his daughters presents with a $500 loan, to be repaid when his next paycheck arrived, plus about $125 in interest and fees.
Though the loan was supposed to be paid off in two weeks, it carried an annual percentage rate of 651 percent, Chillingsworth said.
When payday came, Chillingsworth was able to make only the minimum payment, which covered the interest but didn't do anything to pay down the principal he used to buy his daughters an American Girl Doll, a Nintendo DS video console, clothes and hair clips.
Months later, he was still making minimum payments and rolling over the balance of his Christmas loan after each two-week cycle, hoping that one day he would have enough cash to wipe out the debt.
Then, Chillingsworth's car needed new tires, and he again turned to a payday loan operator.
Now he was paying about $260 in interest and fees every payday, with little ability to chip away at the principal.
"That started the hole," he said. "I felt like my back was against the wall."
Chillingsworth's story is common among those who have turned to payday lenders for emergency cash.
Annual percentage rates on payday loans commonly run in excess of 500 percent, and while some states cap short-term APRs at about 36 percent, Delaware imposes no limits on what interest rates banks, credit card companies and short-term lenders can charge.
Lending industry group Community Financial Services Association of America reports as many as 19 million households use payday lending each year.
Critics of such lenders say Chillingsworth was sucked into a seemingly endless cycle of debt by an industry that makes its profits not from customers who repay their debts on time and in full, but from borrowers who can afford to pay only the interest and fees every other week. Read full (long) article
http://www.delawareonline.com/articl...nclick_check=1

It's all his fault. No one but his.

[Tralee]

Wow, you gotta feel sorry for this poor guy, he seems to have been caught between a rock and a hard place. But, he should have read the fine print. I know, most don't think to do that but the exorbitant rate is there for all to see. Rather than LIMIT how many loans one may take, perhaps a limit and a top interest rate should also be imposed. 600+/-% is way out of line. If only we could educate the borrowers. Payday loans should be a last resort not the first thing you go to.

[childOfLacroix]

Every year, during the Giftma$ season, I rant about how the best way to "put the Christ back in Christmas" would be to eject the retailers from it. It's absurd that this guy felt he had to turn to loan sharking to "prove" that he loves his kids, that the thought of not being able to buy thing$ for them was crushing to him. Now, I'm not excusing his borrowing money to buy worthless crap, but I can comprehend why he felt the way he did. Societal pressure to BUY BUY BUY, especially when you have children, is tremendous during that time of the year.

It's a shame he didn't instead use the occasion as a teaching moment for his children, to show them that love, family and Christmas aren't about buying thing$.

But making payday loans illegal will solve these types of problems. It will just drive them underground, possibly offshore. Further, it's impossible to legislate morality or, as in this case, a situation where someone let their emotions, rather than logic, dictate their decision-making.

[Grin]

600%?
Call it what it is. It's legal loansharking.

[TattdMom]

Every year, during the Giftma$ season, I rant about how the best way to "put the Christ back in Christmas" would be to eject the retailers from it. It's absurd that this guy felt he had to turn to loan sharking to "prove" that he loves his kids, that the thought of not being able to buy thing$ for them was crushing to him. Now, I'm not excusing his borrowing money to buy worthless crap, but I can comprehend why he felt the way he did. Societal pressure to BUY BUY BUY, especially when you have children, is tremendous during that time of the year.

It's a shame he didn't instead use the occasion as a teaching moment for his children, to show them that love, family and Christmas aren't about buying thing$.

But making payday loans illegal will solve these types of problems. It will just drive them underground, possibly offshore. Further, it's impossible to legislate morality or, as in this case, a situation where someone let their emotions, rather than logic, dictate their decision-making.

It's not often that I agree with you child, but you hit it right on the head. Christmas ISN'T about presents it's about family and love of God and His only Son. DH and I decided a very long time ago (about 20 years) that we would only buy one gift for each of our children every Christmas and have kept that tradition for all of those years. There were actually some years there were NO presents, just family time playing games, cooking, watching movies etc. So kudos to you!

As far as these payday "loans" I agree it's legal loan sharking and makes the poor even poorer because they think there is an opportunity to get themselves out of a hole but it's just jumping from the frying pan into the fire. They should all be closed and banned.

[cracker]

600%?
Call it what it is. It's legal loansharking.

Or usury.

[Crabby]

Unfortunately,as much as I feel for the man, we can't always solve things by asking the Gov't to jump in. We can't legislate against stupidity can we? We've got too much Gov't interference as it is. Sometimes people have to make dumb mistakes and learn the hard way.

[motherof3]

What's sad is I keep seeing more and more of these type places opening up. I can't imagine ever thinking one of these "loans" would be a good idea. But obviously many people do. How many others are in the same hole or worse than this guy? I know my best friend was caught up in this kind of debt until she finally borrowed money from her mom to pay it off. Now she just owes her mom

[childOfLacroix]

Yes. Once confined to the inner city and rural pockets of poverty, they're starting to pop up in upper middle class suburbs.

The only way I could see this being a good idea--and I hesitate to use that term; "last resort" would be better--is if you need quick cash for a car repair or other necessity, and payday is days or weeks away. While it would still be expensive, if you borrowed the money and paid it back right away, without rolling the loan over, it wouldn't be a death spiral of debt.

I have a friend who makes use of these types of loans all the time. I don't know whether she rolls them over or pays them off right away. She is adamantly against making them illegal. She doesn't want the gov't "protecting" her.