A Soñar Blog reader in the United States sent this response to the article ‘Thanks, but No Thanks’.
The link for the full article is posted below.
Payday loans are touted as a useful financial product for middle-class households that just need a little help making ends meet in the short term. But critics have long held that the costly short-term loans burn a hole in those households' finances, which can immediately necessitate another loan, and another, and another, trapping the borrower in a cycle of debt.
A new study by the Center for Responsible Lending shows exactly how fast this loan "churning" happens. Eighty percent of people who take out a payday loan take out more than one per year, according to the study, and nearly nine out of ten of those repeat borrowers take out their next loan before their next payday. Half do it within one day of paying off the previous loan.
More than $20 billion of the $27 billion in annual payday loan volume -- 76 percent -- is a product of this churning, according to the study.
"If you look at payday loans in general, the industry looks like it has booming demand, like lots of people need these loans even if they have high cost," said Leslie Parrish, co-author of the report, in an interview with the Huffington Post. "What our findings show is three quarters of that volume is artificially generated."
Steven Schlein, a spokesman for the Community Financial Services Association of America, a trade group for the payday lending industry, brushed off the study.
The Center for Responsible Lending "has a history of misusing the regulator data," wrote Schlein in an email to the Huffington Post. "In fact, none of its studies ever hold up after review by competent statisticians or researchers. Of course, they don't care because they get the media attention and then move on."
Schlein pointed the Huffington Post to past criticisms of CRL reports by regulatory services company Veritec Solutions.
To get a payday loan, borrowers sign over their next paycheck in exchange for an advance usually worth a few hundred dollars, with a typical fee of $15 per $100 loaned. Because of the two-week repayment deadline, the annual percentage rate (APR) of interest on such a loan approaches 400 percent.
Posts
No comments:
Post a Comment