Wednesday, March 28, 2007

For Some, Payday Loans are Helpful Option

By Paul Rizzo
Payday Loan Writer

Looking for some fast cash Monday, Tony Simmons stopped by a payday advance loan lending business on Rivers Avenue.

Simmons isn’t crazy about the interest rates tacked onto the loan, but he doesn’t want a proposal by Sen. Robert Ford, D-Charleston, to restrict the borrowing method that’s worked for him in the past.

“It’s a help,” said Simmons, a longshoreman from North Charleston. “You can’t complain. How else are you going to get the cash?”

Ford is looking to find a way to protect borrowers who might not be as savvy as Simmons from getting into a bad financial situation. He’s introduced legislation to regulate instant cash loan businesses, which opponents argue traps consumers in a cycle of debt, charging up to 391 percent interest annually on what often ends up as multiple loans.

Guaranteed Payday Loans

“They are preying on people,” Ford said. “Once you get in the system, then you’re stuck in it.”Not true, argued Jamie Fulmer, spokesman of the Spartanburg-based Advance America Cash Advance, the nation’s largest payday lender.

“Consumers like this product,” he said. “Consumers understand this product. Consumers use this product responsibly. If they find themselves in a short-term financial bind, we help them get to the next paycheck.”

Ford’s bill, similar to a proposal that’s awaiting action in a House subcommittee, is set for further consideration in a Senate subcommittee this week. Ford first aimed to ban bad credit payday loans outright, but later agreed to seek additional regulations, including setting a limit on the number and frequency of loans.

John Ruoff, research director for South Carolina Fair Share, a Columbia-based nonpartisan group whose mission is to fight injustice and empower residents, said people should look anywhere else before borrowing from a quick cash advance lender.

“Take a deep breath and look elsewhere,” Ruoff said. “A place that says ‘Quick cash’ is probably the last place you want to borrow money from. There are other options.”

Payday lending charges $15 in interest and fees for every $100 borrowed. Personal loans are typically taken out for a two-week period, although some may be for a month. The typical loan is for $300, which results in $45 in charges, Ruoff said.

However, the businesses are most appealing to lower-income residents who are unable to pay off the first loan and, in turn, take out another to pay the first and a third to pay the second and so on, he said.

The loan results in 391 percent interest rate, or $1,173 in charges, if a borrower has an outstanding $300 on two-week online cash loans for each week for a year, Ruoff said. Nationally, he said, the average number of loans per customer is eight with a single company and a median of 13 loans per borrower.

Fulmer said the public deserves the option of selecting a borrowing method that suits the individual family, and payday lending is often less expensive than the alternative. Banks typically charge about $25 for bounced checks and an additional $25 charge from the merchant, he said. Credit card companies usually charge around $30 for late fees.

Fulmer said that lenders will also work with borrowers to work out a payment plan.

SOURCE: The Post & Courier

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