Payday lenders get away with usury
March 1999

Nineteen states, including Florida have specific laws excusing "payday lenders" and "check lenders" from normal usury laws. Payday lenders are storefronts which give you cash in exchange for a post-dated check, typically dated on your next payday. What happens if the paycheck doesn't go through, or isn't as much as you thought? Fine, they'll tack a $40 fee on and wait till next payday. In an example cited in a 1/10/99 Associated Press story, a woman ended up paying $1,220 in "fees" on a $200 loan over a 1 year period. The 'fees' are the equivalent of triple digit interest rates.

Eighteen states set limits on payday loans, while the remainder simply ignore these operations. There are now 8,000 of these outfits nationally--including several large chains--preying on people's need to get cash quickly when they fall behind and their paychecks don't cover their bills.

The proliferation of these legalized loan sharks is one of many signs our economy is not as rosy as they'd have us believe. Title loan outfits, who take your car title in exhange for cash, are another example of business preying on the fact that people are getting paid less, on average, than we were in 1970, while medical, childcare and housing expenses continue to rise.

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