Clark Howard's Tips
June 27, 2008
Payday loans have grown exponentially in states where they're still legal. The Orlando Sentinel recently had a story about a lender who went way beyond what the law permits and charged 1,400% interest!
How can you know a payday lending operation if you see one? Well, they target people who are absolutely desperate for money. They're typically in well-lit storefronts and are staffed by friendly employees who work extended hours to loan money with no questions asked.
It's not unusual for a typical payday loan to have interest rates between 300% and 700%. That's a far cry from the 15% to 20% interest you may be paying on your credit card. The sad thing is that payday lenders aren't required to disclose their interest rates in states where their lobby has bought off legislators.
The military recently got Congress to protect soldiers from the threat of payday lenders; some servicemen and women had their finances demolished and weren't allowed to deploy. Now the rate on loans has been capped at 36% for military and their families. But Clark's heard anecdotally that certain payday lenders are ignoring this and sacrificing patriotism for profit.
Clark had the pleasure of testifying in a state legislative hearing when the payday industry was trying to get its practices legalized. He excused himself to the chairman several times and glared back at the audience, which was packed with payday lenders. Not that they cared. Payday lenders are sociopaths who financially kick you when you're down and don't care about the harm they visit to families.
So it comes back to you to be your own police officer, know the dangers and avoid them. Beware also that many payday lenders have migrated to the Internet.
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