published Wednesday, August 31st, 2011

Payday loans rise, cost more

Staff and Wire reports

Tennesseans who use payday loans to get cash quickly now can borrow up to $500 from a single lender, but could pay higher fees under a law passed this year by the General Assembly.

The law increased the limit a person can borrow, but now payday loan businesses can charge up to $75 in fees on the maximum $500 loan. Under legislation sponsored by state Sen. Bill Ketron, R-Murfreesboro, and signed into law in May, payday lenders can make loans up to two and a half times as great as the previous $200 loan cap.

"The law hadn't been changed in a decade even though the top reasons for payday loans -- unexpected car repairs and medical bills -- have gone up significantly," said Jabo Cobert, vice president of public and government relations for Check Into Cash, based in Cleveland, Tenn., the nation's third biggest payday lender.

Even with the higher limit, which proponents say should help borrowers from having to go to multiple payday lenders to borrower larger amounts, Cobert said the average loan from Check Into Cash is still $200 to $300.

Kelly Newell, of Joelton, Tenn., said she has used payday loans in the past before the limit went up. She borrowed $200 and ended up repaying the loan six months later along with $360 in fees that had mounted during that period.

While some think increasing the limit can be better, Newell said she believes it will perpetuate the debt cycle.

"I don't think the limit matters," Newell says. "Some people are going to borrow what they'll allow because they think something is going to magically come along, and they won't get into all that debt."

Payday loan businesses have boomed all over the country, even outnumbering Starbucks and Burger King outlets. Check into Cash, founded in 1993, operates more than 1,100 locations in 30 states.

Kathleen Calligan, of the Better Business Bureau of Middle Tennessee, says the trend took off in the '90s all over the country."

"Unfortunately, so many states have pretty much wrapped their arms around this industry and have given them special privileges and considerations," Calligan said. "They don't have to abide by the rules that other financial institutions have to."

Calligan said the industry thrives during bad economic times and is aimed at those who have no or poor credit, the young and those who live on or near military bases.

But Paige Skiba, an assistant professor of law at Vanderbilt University who has researched payday loan limits, said raising the limit actually may be a good thing for borrowers.

"When people are allowed to borrow larger amounts, it actually helps them to repay the loan rather than renewing it a bunch of times and then eventually defaulting," Skiba said.

Still, some lawmakers were bothered by the rate of interest some lenders charged. Sen. Douglas Henry, a Nashville Democrat, said he didn't mind raising the limit that can be borrowed, but said he was concerned about interest rates.

"I don't mind the raise to $500. It's the interest rate that worries me," Henry says. "It's excessive."

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GlacierClipper said...

I avoid the Payday Loan rip off companies. I use my Wells Fargo Direct Deposit Advance. Can get up to $500.00. For every $20 that you advance, your Advance Fee will be $1.50. Wells Fargo deducts the $500, if I take that amount from my checking account when I get my next direct deposit which is always higher than the amount allowed for the Direct Deposit Advance.

This is not allowed in many states that tend to favor the Payday Loan companies taking advantage of their taxpayers.

Tennessee is one of those states where this is not allowed.

August 31, 2011 at 1:09 a.m.
harrystatel said...

Start your own lending company underground. Loan out money to willing people, charge what you want on terms agreeable to lender and lendee, make profit, and continue as you see fit.

No force, no fraud, no government corporatism. Just voluntary participants exercising their innate natural rights of free association.

Watch interest rates drop. Competition does that. Not government laws and regulations that promote banks, mortgage companies and payday lenders by their ability to bribe and lobby government officials, legislators, and bureaucrats.

Smell that? That's the smell of free enterprise without the stench of force by government and their corporate commissars.

August 31, 2011 at 7:59 a.m.
Momoftripsplus1 said...

I've used these before and for some people, it's a vicious cycle to get into and they do not realize the possible trap!

August 31, 2011 at 6:59 p.m.

Payday loans are not a rip off?? Boy what an Idiot!!Charging over 400% interest is not a rip off??Payday loans are for poor uneducated minimum wage people who dont have the common sense to see they are being rip off and screwed ..AND they have the goverment in their back pocket..

August 31, 2011 at 7:13 p.m.
morganw said...

The difference between payday cash advance lenders and banks- banks put the money into the owner's account without informing the owner of the account that the money has been "automatically' added. Thus, the owner of the account CAN NOT SAY NO TO THE MONEY. Also, the banks are the first in line when the account holder is paid by direct deposit- again the owner of the bank account has no say as to how his funds are distributed. This whole transaction- putting money into the account, charging 10% of total- even for 1 day, then repaying themselves- can all be done WITHOUT THE ACCOUNT OWNER EVEN KNOWING THESE TRANSACTIONS HAVE OCCURRED. Apparently the banks pushed for this right- not to be subject to interest rate limitations, in the Bank Act of 1980. It's time to throw this out- it would solve bounce check fees, unknown loans to account holders...

September 23, 2011 at 8:44 a.m.
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