Recent Actions Take Payday Lenders to Task for Deceptive Acts and Practices
By Consumers Union on Tuesday, December 3rd, 2013
by guest blogger Caitlin Watkins
Twelve million Americans take out payday loans every year, according to a 2013 Pew report. Payday loans are short-term, high-interest loans – Pew estimates the annual interest rates on such loans at 400%. Folks choose these loans because they are strapped for cash and need money to pay important bills such as utilities and rent. Payday loans are relatively easy to get because lenders do not require enough information to determine whether a borrower will be able to pay the loan back before approving it. Often, borrowers obtain a new loan to pay the old loan back. This fact leads to the central problem that payday loans can trap borrowers in a cycle of debt, as a 2013 Consumer Financial Protection Bureau (CFPB) white paper found.
Recently, the CFPB and the Federal Trade Commission (FTC) have taken a number of legal actions against payday lenders. In November, the CFPB announced its first ever enforcement action against a payday lender. According to the consent order, Cash America engaged in, among other things, unlawful and deceptive acts and practices. The action follows on the heels of multiple lawsuits by the FTC against payday lenders for unfair and deceptive advertising, and unfair, deceptive and abusive debt collection practices. If you took out a payday loan from Cash America, see here for how you may be able to get compensation: http://www.voluntaryloanrefundprogram.com/
Consumers can take heart from the FTC’s and CFPB’s efforts, and we also urge consumers to avoid payday loans altogether by seeking alternatives, such as these:
Take a hard look at your finances before taking out a loan. Remember: it’s much easier to get into debt than get out of it! Scrimp and save money and do whatever you can to avoid high interest loans.
Go to a pawn shop with items you can temporarily live without;
Some banks and credit unions may offer loans that you can repay over time in installments, unlike the one-time balloon payment typical of a payday loan. Seek a signature loan or a small-dollar loan before going to a payday lender. These loans are still expensive, but they are far less expensive than payday loans. They are also subject to underwriting standards, so it is more difficult to get a loan.
Been deceived or abused by a payday loan? Tell us about it here.