The Economic Collapse
May 13, 2013
Would you take out a loan that has an annual percentage rate of 391 percent? Yes, I know that sounds absolutely crazy, but millions of Americans do it every single year. The typical payday loan requires borrowers to pay about 15 dollars for every $100 that they borrow for two weeks. That comes out to a yearly rate of about 391 percent. And the payday loan companies know exactly who to target. They have set up thousands of shops in the poorest communities all over the nation over the last several decades. Each year, approximately 12 million Americans take out payday loans and they pay approximately 7.4 billion dollars in interest and fees on those loans. Sadly, once you get hooked on payday loans they are very hard to stop. In fact, one study found that only 13 percent of payday borrowers get two loans or less per year.
All other borrowers take out more loans than that. In fact, more than a third of all payday borrowers take out between 11 and 19 loans during the course of a single year. And as was mentioned earlier, the interest rates on these loans are beyond exorbitant. Payday loans are estimated to be about 20 times more expensive than bank loans, with annual interest rates that are sometimes as high as 500 percent. The payday loan companies circle the poor like vultures, because they know that the poor are the only ones desperate enough to agree to such terms. This is why we need to shut them down. The payday loan companies are making billions preying on the misery of the poor and it needs to be stopped.
And it just isn't small, disreputable banks that are involved in these practices. The truth is that some of the largest banks in America are now making payday loans...
Some, including U.S. Bank, Fifth Third Bank and Wells Fargo, offer payday loans under names such as Ready Advance, Fast Loan and Early Access, according to the Center for Responsible Lending (CRL). They can carry interest rates averaging between 225 and 300 percent, CRL said.Read More