Key lawmakers, with time running out in the session, are pushing for a compromise bill that would put some limits on pay day loans, which have rates that can balloon to 1,000 percent annually.
{Most people are familiar with payday loans, which are mostly taken out at dedicated storefronts and involve paying a set amount per $100 borrowed on a loan that comes due on your next payday. Because of the substantial interest and the short duration of the loans, the interest rates are shockingly high, with annual percentage rates averaging 339 percent, according to the CFPB study.Direct deposit advances are similar, except that they’re offered at many of the nation’s largest banks, and the loan payment comes out of the next direct deposit instead.The CFPB study, which may set the stage for new rules on lenders, finds that while borrowers appreciate the easy access to credit that direct-deposit advances provide, they often get into trouble with them. Here are some of the more eye-opening statistics. Payday loans direct lenders users are much more likely to get overdrafts than nonusers. Almost two-thirds, or 65 percent, of users had at least one overdraft during the 12-month study period compared to just 14 percent of nonusers, despite the fact that some banks tout direct-deposit advances as a way to avoid overdrafts. Direct-deposit advances tend to get multiple loans during the year. The median user had an outstanding direct-deposit advance seven out of 12 months in the study period, and the average user had an outstanding balance of 112 days during those 12 months. The average payday loans direct lenders user paid $574 in fees over to lenders over the course of a year, which is substantial considering more than two-thirds of users made $30,000 per year or less, and more than 40 percent made less than $20,000. The median direct-deposit advance user had just less than $3,000 in direct deposited income per month, and users had a median of 30 debit card transactions per month versus 10 for nonusers. With some of these statistics, it’s important to remember that correlation and causation aren’t the same thing. For instance, are people who overdraft their checking accounts more likely to need a direct-deposit advance, or are people more likely to overdraft because of direct-deposit advances? But the study does paint a picture of two financial products that can create a financially dangerous cycle of dependence in borrowers. It seems possible that the CFPB will take some sort of action to limit the negative effects of these products on consumers such as seeking new limits on how often a person can use them or how much banks and payday lenders can charge in interest.|The Consumer Financial Protection Bureau, which prepared the report, found that the short-term, high-interest-rate loans are too often made without regard to a borrower’s ability to repay them. As a result, borrowers get in over their heads and have to extend the loans repeatedly, incurring more fees. Two-thirds of payday borrowers, the report found, had seven more loans in a year. The payday loans no faxing are typically made at storefront locations and secured by a paycheck, while deposit advance loans are currently made by a handful of big banks, and are repaid out of an anticipated electronic deposit into a checking account. Borrowers use the loans the same way, the report found. The New York Times reported Wednesday that federal bank regulators, including the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, are expected to clamp down this week on big banks’ offerings of deposit advance loans, setting new rules to protect borrowers. "For too many consumers, payday and deposit advance loans are debt traps that cause them to be living their lives off money borrowed at huge interest rates," Richard Cordray, the Consumer Financial Protection Bureau’s director, said in a conference call with reporters. Have you ever taken out either of these types of loans? What was your experience? The report joins research from other groups, like the Center for Responsible Lending and the Pew Charitable Trusts, in raising concerns about the payday loans no faxing. The bureau said its report looked at more than 15 million payday loans from storefront lenders and "multiple" banks that make deposit advances, and is one of the most comprehensive done on the subject. Officials declined, however, to say how many lenders and banks participated in the report. The loans typically carry high fees. Fees for payday loans range from $10 to $20 per $100 borrowed. So for a typical loan of $350, the median fee of $15 per $100 would mean the borrower must come up with more than $400 in two weeks. (Such a loan would carry an annual percentage rate of 391 percent). Deposit advances are somewhat less costly, at about $10 per $100 borrowed. A $100 loan made for 12 days would carry an A.P.R. of 304 percent. The report cited as a main concern the "sustained use" of the loans by borrowers who repeatedly take out the loans in rapid sequence - often on the same day as the previous loan is repaid, in the case of payday loans. Similarly, the average deposit advance user has breaks of less than two weeks between borrowing "spells," the bureau found. "As a result," the bureau noted, "many borrowers incur significant costs over time. The report said the bureau would analyze the effectiveness of "cooling-off periods" between loans as a way to reduce the harm from sustained use of the loans. The report did not include new online lenders that are making similar short-term loans, but the bureau said it is analyzing such loans separately. If you have ever used a payday loan or an advance deposit loan, would being forced to wait between loans help you manage the debt? | A Brief Overview on these Loans
Payday loans are small loans to be used for short term purposes. The most common uses for such short term loans include paying for utility bills, rent, school-related expenses, car or home repairs, and grocery purchases. They can also be used to cover emergency expenditures, such as hospital or medical bills. To avoid having to pay for overdue or surcharges, individuals take out these loans to cover pending expenses. Because this particular type of loans has become increasingly popular, there are now a significant number of payday loan lending institutions. There are lenders in every state, making financial aid easily accessible to a greater number of people in need of quick cash sources.
Types of Payday Loans available payday loans no faxing come in many different forms. Some of the most popular include:
o Quick Approval Loans or Instant Approval Loans - As the term already suggests, application of these loans are approved quickly or instantly, as long as all of the necessary requirements have been submitted and completed. These loans are often approved within the same day or even just a few hours after submission and verification of the requirements.
o No Fax or Faxless Cash Advance Loans - No Fax or Faxless payday loans will not require you to own or even have access to a fax machine just to get approved for the loan. This type of payday loan is also very easy to get qualified for, since the requirements are only minimal and basic.
o Payday Advance Loans for People with Bad Credit - This type of loan is specifically designed for people who have suffered in the past that resulted in their credit scores being significantly affected. If you are one such individual, you will still be able to get the financial assistance you need without worrying about getting rejected because of your bad or low credit score.
o No Credit Check Cash Advance Loans - Most banks and credit unions require credit checks on their applicants. However, many of today’s payday loan lenders no longer impose this requirement, which means that you have higher chances of getting approved regardless of the state of your FICO score.
o Same Day Payday Loans - If you get qualified for a Same Day payday loan, you will receive the money that you have borrowed within the same day of your application. All you need to do is to ensure that the requirements you will submit are complete, so that you can soon expect the money to be deposited or wired to your checking account. There are many other types of payday cash advance loans, but these five are the most common and popular ones.
When it comes to benefits of payday loans, there are a lot, which is one of the main reasons behind their popularity. Some of the greatest benefits that these loans provide include the following:
o Hassle-Free Application and Qualification - Payday cash advance loans are considerably easier to apply for compared to traditional loans. The qualification standards are also easier to meet. Most payday loan lending companies only need applicants to fulfil basic and minimal requirements. As long as you will be able to meet these criteria, your chances of getting approved for the loan are high.
o Reduced Risk of Large Debts - The amount of money that you can borrow from a payday loan lending institution depends on your salary. This then makes it a lot easier for you to repay the loan that you have taken out. As an end result, the risk of you being in large and deep debts is reduced.
o Flexible Loan Terms - Payday cash advance loans, since they are specifically made for short term purposes, allow you to have an easier time repaying the loan lending company. Also, since these loans are often required to be repaid as soon as the next pay check comes in, you would not have to think about being in debt for a long period of time.
o Widely Available in Many, if Not all States - Again, because payday loans have become extremely popular, the number of lending institutions offering such services has also increased. This means that you will not have any problems finding a payday loan lender who will provide you with the financial assistance that you need whenever you need it.
Important Reminder before Taking out these Loans
There are several things that you need to keep in mind when taking out payday loans. One, these loans are not designed for long term payment debts, so you should keep it that way. Two, these loans come with slightly higher interest rates than the conventional loans from banks and credit unions, so you should expect to pay more money to the lender. Finally, you should use the money that you will be borrowing from the payday loan lender only for important things and not going on an extravagant shopping sprees or the like.|According to a recent white paper [PDF] from the Insight Center for Community Economic Development, the huge fees - the payday loans no faxing calculates the average APR on a payday loan is 392% - may make billions for lenders, but would be better for the economy if spent elsewhere.
Writes the Insight Center:
The economic activity generated by payday lending payday loans no faxing firms receiving interest payments is less than the lost economic activity from reduced household spending. Specifically, each dollar in interest paid subtracts $1.94 from the economy through reduced household spending while only adding $1.70 to the economy through spending by payday lending establishments.
As a result, for each dollar of payday lending interest paid, an estimated 24 cents is lost to the U.S. economy.
For example, a payday loan that carries an interest payment of $40.00 causes a loss of $9.60 - nearly one-quarter of the fee - from the economy.
The researchers calculate that for 2011, during which payday lenders took in an estimated $3.3 billion in interest, the net loss to the U.S. economy was $774 million, as household spending tends to outpace spending by payday lending businesses.
Additionally, the report states that these loans resulted in $169 million worth of Chapter 13 personal bankruptcy filings in 2011.
The Insight Center figures that around $80 million alone went to payday fees payday loans no faxing instead of doctors, hospitals, healthcare, medicines, nursing care and other medical needs. Another $9 million that could have been spent on groceries for households went unspent by payday lenders, concludes the study.
California was by far the state with the largest net loss, say researchers, who calculate that payday loans resulted in a loss of $135 million for 2011. Texas took the second biggest hit with a net loss of $95 million, followed by Florida ($76 million), Mississippi ($61 million), Illinois ($55 million), and Alabama ($48 million).
This redirection of household income also has an impact on jobs, according to the Insight Center researchers. Nationwide, the study claims that 14,000 more jobs would have been created if payday borrowers had spent the money paid in fees on regular household expenses instead.
The Insight Center report comes at the same time as a white paper from the Consumer Financial Protection Bureau, which found that even though payday loans are marketed as short-term solutions, that many borrowers find themselves caught in revolving doors of having to take out another loan to pay back the previous loan. The CFPB found that the average payday borrower spends six months of the year in debt to the lender, and that the median borrower takes out 10 loans every 12 months, with a full one-third of borrowers taking out between 11 and 19 loans each year.
The payday loans no faxing are illegal in more than a dozen states. Many consumer advocates have called for regulators to put an end to the practice altogether or to rein in interest rates and fees to levels where the borrower does not require multiple loans to get back to square one.
Payday lenders have defended the practice by saying it provides a necessary service to lower-income households who need an immediate cash infusion. This may be true, but as the CFPB report shows, lenders rely on repeat borrowers for the overwhelming majority of their revenue, with more than 75% of fees coming from borrowers taking out at least 11 payments in a year. |The latest proposal reverts to what Sen. John Carona, R-Dallas, proposed last month on the Senate floor, before the bill was loaded with pro-consumer amendments aimed at clipping the wings of the lending industry.
Texas is the only state in the nation that allows short-term lending payday loans no faxing that puts no restrictions on interest rates, rollovers, fees and term limits.
The industry has grown into a multi-billion business in Texas and has become the only loan outlet for many low income Texans. The lenders point out most customers repay the loans in a timely way and are repeat customers.
The companies have also spent millions for lobbyists and in campaign donations, giving them formidable clout in the Legislature, lawmakers said.
But in committee testimony, customers explained how a $200 loan could mushroom into thousands owed in a very short time, and how it is almost impossible to climb out of the debt cycle. In Texas last year, for example, 35,000 cars were repossessed by car title loan companies.
Mike Villareal
Negotiations between the lenders and lawmakers have continued and Tuesday, Carona said they are close to moving a bill forward.
"Conservatively, it will save consumers $200 million a year or more," Carona said.
"While it’s not a perfect product - particularly given the overall interest rates and other charges of these products - it’s the very best bill we could hope to advance this session," he said.
The bill as tentatively drawn up would limit any person to one payday and one auto title loan at a time. The size of the loans would be limited by a customer’s monthly income. The loan could only be renewed four times.
In exchange, the state would hold in abeyance and place a moratorium on city ordinances seeking to control payday storefronts.
Don Baylor of the progressive think-tank Center for Public Policy Priorities said consumer groups are largely in support of the proposed bill.
City ordinances, even with their greater restrictions than the proposed state law, are limited because the loan companies are moving beyond city boundaries, Baylor said.
"So much of this business is moving off-shore, out-of-state and on-line. That’s a big victory for us. We’re able to say these laws apply to you," Baylor said.
Carona said the bill is not perfect, but is better than what is happening now.
"Any progress on an issue as contentious as this one…should be one that’s embraced," Carona said.
A press conference to promote the bill is scheduled Wednesday by Carona, the Republican chairman of the Senate Business and Commerce Committee, and Rep. Mike Villareal, the Democratic chairman of the House Investment and Financial Services Committee.|In fact, so many are the lenders, particularly online, that there is tough competition existing in this business with each lender vying with the other for customer attention. In such a scenario, it is quite common to find scammers passing of as genuine lenders as they try to earn a quick buck in the name of helping an innocent person financially. When you search for payday loan lenders online, beware of such fraudsters and instead, find an authentic lender who can truly lend you a helping hand. Here are some tips to avoiding scams when looking for a payday loan lender. How to avoid scams when searching for a Payday Loan Lender payday loans direct lenders A typical fraudulent action carried out by the scamming lenders is to ask for money even before they lend you some. Usually, money is asked for during the application process under the heads of application fees, insurance and/or taxes. The scamming is done so smoothly that new customers cannot even identify if the website is legitimate or not as even fake testimonials are included to woo them. The first thing to bear in mind is that you should not be paying money to get money. Particularly, if you are asked for upfront fees you should immediately smell a rat and move onto other lenders. Know that the legitimate lenders do ask for fees but only at the time of repayment. Never trust a lender that asks you to wire money even before your application is approved. To side-step fake lenders, learn the specific payday loan laws of your state. Additionally, ensure that you avail of the loan only through a registered company. Do not borrow money from lenders that state that credit check can be dispensed with. Always read the loan terms and conditions carefully to glean any information related to hidden fees and loan costs. When you are going through the loan contract read the repayment process too, so that you do not end with out-of-budget loan costs. Check if the repayment time can be extended as this will help you tide over any financial emergencies while remitting the loan. It also pays to check your bank, credit and debit card statements regularly to see if you have already been scammed. Finally, use a secure browser to avoid personal and bank information being leaked out. With these few tips, you can easily avoid payday loans scammers and find a lender who will actually bail you out of a financial crisis.payday loans direct lenders