Payday Lending: A Bag of Money and A Bigger Bag of Trouble

You need money…you need it fast……and you can’t get it from a bank.  You’re sitting at home watching tv and suddenly the answer appears:  a payday loan!  The money you need with minimal questions or delay.  And your credit is a virtual non-issue.  Great!  So you reach for the phone or computer to sign up.  STOP!  Think for a moment..or two…or more.  Is this a good financial move for you?Found money

Payday lending is one of the most abusive and predatory forms of lending that exists in American society.  Money is loaned at exorbitant interest rates and once you start making loan payments it seems as if they will never end.  The loan contracts are often tucked away on websites and are primarily form contracts with all types of bad provisions:  mandatory arbitration, waiver of your right to a jury trial if something goes wrong, agreement to pursue any claims (or be pursued) in a court in a far away state, application of the law from a state with which you have no familiarity, etc. 

Let’s take a look at some of the highlights (NOT) in the payday lending industry, shall we? 

  • The “rent-a-tribe” scam.  Summary:  Internet-based lender asserts itself as a tribal nation and assumes it is entitled to certain sovereignty (read in:  free reign) and protection from consumer claims and state and federal laws.  This hurts consumers and gives Native American tribal nations a bad name.
  • Big banks get a piece of the action.  Summary:  Bank of America, Wells Fargo, and several other well-known national banks lend a hand to payday lenders seeking to collect their money from consumers’ bank accounts.  And the withdrawals taken by the payday lenders can send a consumer’s bank account out of balance leading to overdraft fees and the imposition of other seemingly punitive account conditions. 
  • Help Yourself to More Money.  Summary:  Payday lenders use unauthorized credit card transactions, sometimes involving fraudulent purchases and goods never purchased, to take money from consumers’ bank and credit card accounts. 

To learn more visit a blog devoted to the payday lending industry.  Federal laws and laws designed for Native American tribal nations often override state usury laws, credit and lending laws, and laws banning payday loans.  This federal preemption of state law explains why these loans are being offered and accepted everyday in locations across the United States.  For example, North Carolina has outlawed payday lending yet many North Carolinians still obtain these loans– legally yet often fretfully.  Some lenders, however, do the right thing and have ceased participating in payday lending.  Regions Bank in North Carolina decided to leave the industry after a bit of nudging from the North Carolina Attorney General and several consumer advocate groups. 

If you are in need of money be sure to do your homework and understand the terms of the potential loan agreement.  Make the best choice for your situation.  If you believe you have been the victim of abusive lending due to a payday loan, car loan, or another finanical product you should contact your state’s Attorney General’s office and a consumer law attorney.


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