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PAYDAY LOANS ONLINE
by Anonymous on Thursday, February 07, 2008 @ 04:45:13 AST
Pay Day Loan [www.solveonline.com] companies promise to get people cash when they need it most, but the state is considering capping the high interest rates that accompany such loans.
Payday lenders typically charge a flat fee for loans. Someone borrowing $100 would pay a $20 fee, $150 would cost $30, and a $500 loan would incur a $100 fee. The term is 14 days.
Although the fee is flat, in interest terms, it's equal to several hundred percent. New Hampshire lawmakers are considering imposing a 36 percent interest cap.
Payday lenders said a cap would drive them out of business, but officials said the loans are designed to keep people coming back for more. Nothing in the law prevents a borrower from taking out several loans from different businesses at the same time.
"The payday lending model is designed to trap people in debt," said Sarah Mattson of New Hampshire Legal Assistance. "It's an industry that can't survive unless people borrow over and over and over again."
But some borrowers who said that they have relied on payday advance loans at one time or another said that the short-term, pricey loans are preferable to credit card debt or bounced check fees from their banks.
"With credit cards, if you don't pay on time or pay late, their interest rates keep going higher," said Jessica Akusis, a former borrower.
Lenders said that the flat fee they charge doesn't go up, even if the borrower can't pay on time, so legislators are trying to protect consumers from themselves.
The bill is being examined in a subcommittee to see if it will move forward.
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