Released: December 01, 2006

More controls urged on payday lenders

Source: Phuong Cat Le, Seattle Post Intelligencer

States should do more to restrict payday lenders, who pocketed $4.2 billion in fees from borrowers last year, according to a report released Thursday by the Center for Responsible Lending.

Washington State ACORN, a community activist group, released its own report on the same day showing that King County, WA, residents paid more than $40 million in excessive fees to the lending establishments.

“Payday loans sink borrowers into quicksandlike debt,” said Michael Calhoun, president of CRL.

Consumer advocates and military officers say the loans - offering quick cash advances secured on a borrower’s next paycheck - saddle borrowers with huge debt and high interest rates. The one-time fees translate into exorbitantly high interest rates on a standard annual-percentage-rate basis, sometimes as much as 800 percent.

Lending fees add up quickly if borrowers don’t pay them off on time, and many “roll over” the loan repeatedly, leading to even more charges, Calhoun and others said. The average payday borrower pays back $793 for a $325 loan, the report said.

Consumer advocates want states to limit the annual interest rates charged on payday loans to no more than 36 percent - similar to a cap on payday loans to military personnel that Congress passed this fall.

Read Full Article: More controls urged on payday lenders