Leadpile’s Blog

There was some new local news regarding the payday lending industry.  Our (AZ) House of Representatives voted Monday against a bill that would allow AZ payday lenders to charge up to 113% APR.  According to AZcentral.com, “The legislation would have allowed loans of $200 to $3,000, and they would have to be repaid in five to 24 months. Interest-only payments were prohibited and borrowers could repay loans early with no penalty.” There seems that there should be some happy medium in regards to regulating the payday lending industry, but not necessarily having to eliminate it totally.  Where will this AZ payday legislation end? Allow payday loans…. NOT allow payday loans? Stay tuned!

CSOs also known as Credit Service Organizations are unregulated companies that are now doing payday loans and other short term loans like auto title loans. It seems that with some recent payday loan regulations, there have been some that have been able to avoid the regulations because they are a CSO.  Credit service organizations offer payday loans and other short term type of loans without any limitations on fees they are charging the consumers.  However, they were initially created to help register our credit repair companies, not necessarily be a payday lender.  According to the dallasnews.com, “CSOs in Texas were originally established to control credit repair businesses; however, in the past few years, small-dollar lenders are operating as CSOs under a statutory loophole that allows them to obtain “an extension of consumer credit” for borrowers.”
Leadpile Lead Exchange works with all sorts of payday loan leads. These are all consumers that are looking for a short term fix to a temporary problem. Based on this article, CSOs are the ones that are doing some of the lending, not necessarily payday loan lenders per say.  Bottom line:  as a consumer understand any loan you ever take out and the fees associated with it.

Payday loans, also known as a cash advance, are a very large business in the United States.  These short term loans often are under a lot of scrutiny from lenders and government agencies.  However, it is hard to ignore the fact that I read that the payday loan industry is potentially lending 50 billion dollars.

These short-term loans are being taken out by people who need cash and possibly their bank, credit union or credit cards are not an option.  As I have pointed out before, the average person taking out a payday loan is not what it used to be, or what people generally think of as a “typical” customer. According to Indystar.com, “the average household income for Advance America customer has risen to $43,000, with 90 percent holding at least high school diplomas and half with some college. About half have credit cards.” Indystar.com also goes on to point out that nationally, the number of payday outlets has gone from zero in 1990 to about 25,000 today. However, many choose the convenience of searching online for their short term loan, and then get matched up with companies like Leadpile Lead Exchange to then connect them to that needed payday lender. The fact that this industry is potentially a 50 billion dollar industry, points out that there is definitely a need for these short term loans.

In recent news, another state has implemented regulations regarding payday lending locations. An ordinance was passed in Springfield City, IL requiring a minimum distance between payday loan stores.  It appears some legislators are also looking to try and get some regulations implemented about the maximum interst rate allowed on the loans.  This is something that is already in place in several states around the US.  Leadpile Lead Exchange will keep an eye on this, because we are working a lot with the payday loan industry and always want to keep updated on any new news going on.

A recent post by the Payday Pundit brings light to an interesting article in the Omaha World Herald.  This article draws a comparison between the payday loan fees and the health care industry.  According to the Herald, “A study of payday loans in the Omaha area concluded that more than $19 million in excessive fees were not spent in other ways last year, with the health-care industry bearing the brunt of the lost dollars.”  The article also goes on to say payday loans should not be banned because the alternatives are even worse for those states that have payday loans outlawed.   I am confused?  Do they want to keep payday loans or get rid of them?

Leadpile Lead Exchange is always looking for news going on with different states in the payday loan industry, however I am a little unclear if this is a article to promote payday loans or an article against payday loans?  How do you see it?

There was a recent report by Channel 15, that brought up a study done by Vanderbilt University. In this study it pointed out, “Payday loan customers who are approved on their first application are more likely to file for bankruptcy than those whose initial applications are denied, according to a study out of Vanderbilt Law School. ” I am not sure I understand where this is going as far as trying to point out a bankruptcy filing rate with those that took out a payday loan. The people that could not get a payday loan probably did not qualify for the loans because of some sort of income issue or other specific requirement the payday lenders require. I would think this sort of individual had more potential of falling behind and contemplate bankruptcy, don’t you think?
Leadpile Lead Exchange has been generating payday loan leads for some time now. Blaming or relating  bankruptcy filing rates to those that have taken out a payday loan, and not those that have been approved for one, just does not make sense to me. Does this also mean that someone who took out a new auto finance loan is more likely to file bankruptcy, versus someone that applied for an auto finance loan and was denied? There are people that have a lot of outstanding past due debt that I would say is more of a correlation to filing bankruptcy, versus someone who took out a payday loan.  Those that did not manage their debts properly, had an expected loss of job, or those that had a major financial change in their life are more of a cause of someone filing bankruptcy. Payday loan = bankruptcy?  Payday loan = what else?

Over and over I am bringing the attention to the payday loan industry, and really how it is not necessarily taking advantage of consumers.  I couldn’t resist a good post on the Payday Pundit, who brought up some good points about a payday loan.

“Let’s consider some alternatives for the working mom who is short $100 until payday, 14 days from now. She could get a $100 payday loan, pay $15, and the APR for that two week loan would be 391 percent..

She could also choose to write a bad check and pay an average of $48 in NSF and merchant fees. That would be a comparable APR of 1,251 percent!

Even if she has courtesy pay with her credit union, the average fee is $25, or an APR of 650 percent. Another option for her might be to not pay the $100 minimum balance due on her credit card, resulting in a $26 late fee—678 percent. If she chooses to not pay her $100 utility bill which may result in a $50 late or reconnect fee, that’s a comparable APR of 1,304 percent!

The argument can be made that by securing a payday loan to solve her cash flow needs, this woman is taking a proactive approach to her financial dilemma.

The Center for Responsible Lending indicates the 11 states that banned or limited payday lending saved consumers $1.4 billion in fees in 2006. But eliminating local payday lending activity does not eliminate the need for emergency cash loans. People still come up short prior to payday and the center does not address how these consumers managed their cash-flow problems. If they had to use one of the other alternatives, or had to drive to an adjoining state that made payday loans, or used the Internet to get an even higher priced loan, it is possible consumers in these states paid even more to solve their cashflow problems.”

This just keeps going back to the fact that there are bad with everything, and if you abuse the use of a payday loan you will NOT be in a better position.  However, as Credit Union National Association and the National Credit Union Foundation state there are other alternatives that could be worse for a consumer.  Education is key with payday loans and any other type of financial solution customers choose to take.

Question is, the holidays are now here and there are going to be families that need those gifts and food on their table. Is the payday loan the smartest solution for that consumer?  Leadpile Lead Exchange will be here no matter what the answer to that question is, to provide the service to the consumers that DO need this temporary loan.

Time is running out for consumers to read up on all the popositions being presented to them on the November 4th ballet. One thing that is being voted on in the states of Ohio and Arizona, is in regards to payday loans.  How much does everyone really understand about payday loans?  One myth I thought very important to point out:

Myth:  Payday lenders hide fees and mislead consumers.

Fact:  Just like any other service or loan you obtain, there is a cost to do get that loan or service.  In addition, any payday loan you take out there will be a cost to taking out the loan.  According to the CFSA website, “The cost of a payday advance is fully disclosed to customers on signs in the stores and in disclosure agreements. Moreover, in accordance with the Truth in Lending Act (TILA), the terms of the loan are clearly outlined in the lending agreement. Payday advances involve single, flat fees and there are no hidden charges, balloon payments or accruing interest. CFSA members also provide an educational brochure emphasizing responsible use of the product and offer a free right of rescission should the customer change their mind.”

CFSA also went on to say that in a recent survey 96% of the people were aware of the fees associated with taking out the payday loan.  Just like with any other loan, there are documents presented to the consumer with all the fees of doing the loan in black and white.  Are people sometimes just so anxious to get a loan, that they do not take the time to read the documents they are signing?

Leadpile Lead Exchange wants consumers to read everything before agreeing to take out a payday loan, or any other loan.  Knowledge is power!

The payday loan industry is getting a lot of attention, especially in the states of Ohio and Arizona. Those on the outside possibly do not fully understand the payday loan industry and there are some misconceptions about the short term loans.

Myth: Payday loan lenders do not want to be regulated.
FACT: According to CFSA, this is quit the contrary. Most payday lenders do want to be regulated and have certain industry guidelines. However, there are those that are trying to eliminate the industry as a whole, and not deal with keeping the “good guys” in business.
Currently, there are 37 states + the District of Columbia that have payday regulations. CFSA is working on trying to get regulations implemented on the remaining states, however they are not wanting to see the industry go extinct. Therefore, the question is… why is the payday loan industry going through such tough scrutiny, when in comparison with credit cards and other financial services there are similar costs/fees associated with them?
Leadpile Lead Exchange understands there are a lot of myths about payday loans, however the key is for those that are not fully educated on the industry, to read up to fully understand all aspects of this financial product compared to others. There is good to these types of loans, and they are sometimes very much needed.

We all hear the opinions on both sides regarding payday loans. I came across this scenario that really points out the similarities of taking out a short term payday loan and renting a car. According to Ohioans For Financial Freedom commercial (youtube video),

Renting a car can cost about $29.00 per day. But imagine if the government required the rental company to quote an annualized cost of $10,585!

It’s just like the government saying that a $100 emergency loan costs $391 for the entire year, when it only costs $15 for two weeks. If you only need the loan for two weeks.—the yearly rate is absurd.

Leadpile Lead Exchange deals a lot with payday loans, the consumers wanting them and the lenders wanting to provide the loan for them. This scenario I found really makes it a little bit easier to understand the comparison amongst payday loans to something like a credit card or a rental car. There is bad in everything if it is abused. There is a need for short term loans sometimes, and a payday loan is a reasonable loan to take out for that short term need.

With all the regulations going on with different states, I thought this was an interesting article about the effects banning payday loans had on consumers in NC. According to The Community Financial Services Association (CFSA) website, banning payday loans in the state of NC is affecting consumers. The reality is that most that are trying to get rid of payday loans in these different states, have never needed a payday loan.
Understanding fully what payday loan consumers are going through, does not seem like a reality to those trying to ban them in the different states. Do those that are trying to ban the payday loans understand what taking them away is going to do? Do they understand that some credit cards are a much more expensive option for the consumers? What are some other options available to consumers in place of a short term payday loan? Are they prepared to offer these other alternatives to the consumers, to help them get out of this temporary situation?
In the state of NC, there seems to be some effects with the fact that payday loans were banned there. According to this CFSA article, “In fact, respondents’ answers to the survey clearly show that the elimination of payday loans in North Carolina did nothing about the demand and forced consumers to replace payday loans with costly, less desirable and even dangerous options.” Overall, states with either pending regulations or those states trying to regulate, should maybe look at the overall picture of the payday loan industry. Some don’t CHOOSE to get a payday loan… they might have no other option. Leadpile Lead Exchange understands their are consumers needing a loan to fix a temporary financial situation, and we have the lenders/buyers available to provide that much needed loan to the consumers.

With all the scrambling in Ohio to regulate the payday lenders, C.O.A.S.T. (Coalition Opposed to Additional Spending on Taxes) said it will urge Ohians to vote “no” on the November vote regarding regulations on the payday lenders. A representative of this group believes the government should stop tracking everything that people do and stop trying to change what people do.
It seems the overall opinion is that people want to have control over their own lives. They don’t want “big brother” to control when and where they get their much needed money.
Time will tell, who else comes out of the wood work expressing their support or objection with the payday lending issue in Ohio.