Payday Loans Blog

The Federal Reserve Board conducted a survey of United States families' finances.  The survey included information on whether or not the family had taken out a payday loan in the past year.  This is the first time the survey has included a collection of this type of information.  

There were several things discovered regarding American families and payday loans.  For example, the survey concluded that a very small percent of families in the United States have actually applied for and used a payday loan.  Overall, about 2.4% of families have reported taking out any kind of payday loan.

The survey also showed that younger families were more likely to use payday loans.  Approximately 4.9% of families who took out a payday loan were "headed by a person younger than age 35", while about 0% of them were "headed by a person aged 65 or older."  

One of the very interesting statistics that this survey brought to light was the main reasons for payday loans.  They concluded that families generally use payday loans for emergency situations. 

The findings stated that, "The most common reason given for choosing a payday loan for families that had taken out suck a loan was "emergencies" and similar urgent needs or a lack of other options(35.9%).  Roughly equal shares of families cited convenience in obtaining the loan (21%) or the need to pay for living expenses, including food, gas, vehicle expenses, medical payments, utility costs, or rent (20.6%).  A smaller fraction (10.8 %) of these families reported to pay other bills and loans..."The remaining 12.6 % of families with a payday loan in the past year cited other needs, including "Christmas" or the need to "help family.""

It's interesting to see that the majority of families took out payday loan did so for emergency reasons, or to just be able to get basic needs.  There are so many different reasons that payday loans are necessary.  They are a helpful and convenient way for those who need money to get it quickly.  Emergencies happen unexpectedly.  That's what emergency means!  Payday loans are there to help when necessary. 

This survey easily demonstrated that payday loans are used by a very small percentage of American families, but that it is a needed option for those in certain situations.    

Enough is enough. The Center for Responsible Lending is going to far in their crusade against payday loans. Their latest antics are a downright absurdity and do a disservice to anyone involved in statistics and research.

Their "study" has found that three in four Americans favor a 36% APR cap on all loans. The idea is to show legislators that their constituents support them if they ban payday loans, thus gaining favor with the politicians.

The phone survey questioned 1,004 adults around the country. That was their first mistake. You cannot measure public opinion by asking 1,004 people. That's an average of about 20 people per state. Could I ask 20 random people in my state what their thoughts are and then conclude that their opinions represent my whole state?

Here's the best part. This is word for word the itnroduction given to participants before any questions are asked:

"Some people say that we should crack down on high-cost lending practices in order to restore the health of our nation's economy.  To that end, Congress is considering limiting the amount of interest that lenders can charge to 36% annually.  This cap would apply to loans like mortgages and car loans, which are usually less than 36% anyway, but it would also cover high-cost loans, like payday loans and car title loans, which can carry annual interest rates of around 400%."

They then proceeded to ask if they favored an interest rate cap and so forth. But can we say leading question? How do you think people will respond to your question after you just told them that blathering nonsense?

Now my personal favorite is what comes next. They cited an anecdote of a poor old man who got caught in the debt trap of the predatory payday lenders. Here is their version, word for word:

There are so many benefits of a pre-paid Visa card.  They give you the advantages of an ordinary Visa card without having to go through a credit check or even have a bank account.  

Check City offers a quick and easy way to get a pre-paid Visa card.  In getting one, you open yourself up to so many different options and benefits.  

For example, you can use your pre-paid Visa card anywhere Visa is accepted...which means you can use it worldwide!  That's definitely a benefit.  The pre-paid cards can be used all over the world with no hassle or trouble.  

You can also take advantage of easy loading options.  The pre-paid Visa card from Check City includes the options to add funds to your card by transferring money from a bank account or by bringing cash to a Check City location.  

Just like paying with a traditional Visa card, you can use your pre-paid Visa card to pay bills online.  You can also use the card number to pay over the phone.  Both of these things make these cards easy and convenient.  

Another great benefit to a pre-paid card is that, unlike credit cards, you aren't forced into debt!  With a regular credit card, you put yourself in debt everytime you use it.  However, a prepaid card can be used without fear having to pay that money back-you've already paid it!  

The service also makes it possible to keep track of your spending and stay informed.  The Check City pre-paid Visa card offers alerts that will send information about transactions you make directly to your email address or your cell phone.  This amazing feature provides helpful reminders for you and provides extra insight into what you're spending your money on.

All of these things show why a pre-paid Visa card can be a benefit to you.  To get a pre-paid card, just stop by your local Check City store and talk to a friendly staff member.  They will walk you through the process and answer any questions you may have.  Make your life a little easier.  Get a pre-paid Visa card!

The Center for Responsible Lending, whose founders are on the list of 25 people to blame for the economic crisis, released a flawed study on payday loans today. In it they claim that payday lenders in California are targeting minorities.

My oh my, where to begin with this disaster. I suppose we can begin with the study itself. The Senior Researcher for CRL is named Leslie Parrish. One might suppose that a Senior Researcher has a strong background in research, academics, statistics and mathematics.

Parrish received her Bachelor of Arts in Public and Urban Affairs from Virginia Tech. Then she received her Masters Degree in City and Regional Planning from the University of North Carolina at Chapel Hill. Public and Urban Affairs? City and Regional Planning? How was Parrish trained to be any kind of researcher?

Oh right, there's that little note at the bottom of their website that says they may partner with other organizations and institutions in its research. Translation: no one at CRL can do research, so they pay other people to do it and put their own spin on the results.

Need an example? After breezing through the results and data in their presentation, they say this absurdity: "The average California borrower takes out 10 loans a year (likely on a consecutive basis.) This debt trap costs the borrower nearly $450 in fees for $255 in credit."

My best guess is that they suggest here that the average loan is for $255 and costs the borrower $450 in fees. They claim the average APR is 459% in California, so it would take 140 days for $255 to get $450 in fees. That's almost 5 months of not paying the loan back.

Is the real problem here the APR? Is it? Are the payday lenders the bad guys here? Are they ripping everyone off? Or could it possibly be that some borrowers are completely lacking in responsibility. Five months to pay back a two week loan? That's just ridiculous.

Here's the kicker though. Their analysis says that African Americans and Latinos make up about 55% of payday loan borrowers in California. The whole point of the study is that payday lenders set up shop near minorities, right? That payday lenders target minorities?

Well, the study claims that payday lenders are 2.4 times more concentrated in minority communities. And that is supposedly after isolating the race variable. (Which by the way is statistically impossible to do.) Wouldn't any rational person assume that if payday lenders are found 2.4 times more often in minority communities that this would mean minorities use payday loans something like 2.4 times more than whites?

Not even close. Its 45% to 55%. That is about 1.2 times as many minorities as whites. Let's illustrate the point.

Suppose we have 100 payday loan borrowers. 55 are minorities, 45 are white. Now we have 10 payday lenders. Since the researchers magically isolated race as a factor and said as an isolated variable that payday lenders are 2.4 times more clustered in minority communities, we can say 3 payday lenders set up near the 45 white borrowers, and 7 set up around the minority borrowers.

Suppose all stores attract borrowers equally. The ones in the white neighborhoods will attract about 15 people in each store. The ones in the minority neighborhoods will bring in about 7-8 people in each store. Doesn't it then make good business sense to set up shop in the white neighborhoods? So why in California is this apparently not what payday lenders are doing?

Because quite simply, payday lenders aren't targeting minorities. The foot traffic needed in each store to stay in business amidst so much competition is a lot. It seems that regardless of the payday lender's location, they seem to be attracting borrowers of all races, even though they are closer to African American and Latino neighborhoods.

The target market for payday lenders are people who need cash quickly, in small sums, for short periods of time and who don't have access to any other type of credit. People like that tend to not be wealthy, not own a home and not have great credit history.

Payday lenders are not sitting in rooms around the country talking about how they can target minorities and exploit them. Locations are decided upon based on how much exposure they will receive from potential customers. Payday loans are blind to race and shame on the irresponsible CRL for suggesting otherwise.

A columnist for a San Angelo, Texas publication describes payday loans as filling a "financial void".  The columnist, Dennis Weese pointed out several reasons why payday loans are such a necessity.  But the overall feel of the article was how payday loans can serve as the best option for a lot of families with financial struggles.

In every state there are individuals who are hard-working citizens, but live paycheck to paycheck.  Especially with the current economic situation, many families and individuals have learned how to stretch their dollar.  However, sometimes they need a little extra to pay for a pressing need, like car trouble.  

The article also points out that a lot of families don't make maxing out a credit card an option (which is very wise), and if a check bounces, the bank fees are, more often than not, greater than a short-term payday loan would be.  

Because of different financial situations, it's essential to have a variety of responsible lending options.  Payday loans have "filled the void" that most banks left when eliminating short-term, small-dollar loans.  There is still a large demand for those types of loans, and most consumers who enter into these loans do so responsibly and are greatly benefited by them.

There are those who do not weigh their options appropriately and may have financial issues with payday loans.  Often, these people would have financial struggles with any financial option they were to choose.  Payday lenders work hard to make sure their customers understand how exactly a payday loan works and what they will ultimately be paying for the loan. 

Payday loans are a viable solution to those who need them, and while regulations are necessary for any industry, payday loan companies should not be solely targeted for providing a service that is so helpful for many citizens. 

The Wall Street Journal reported today that consumers are not happy with overdraft fees, the alternative banks offer to payday loans. The average bank fee for overdrafting is $27 per transaction. Banks make an estimated 25% - 30% of their revenues from overdraft fees.

So who can blame consumers for their outrage? Imagine, having $10.00 in your account and going out and spending $5.00. You think you are fine, except that a transaction just cleared that you forgot about a minute before, leaving you with only $4.00 in your account.

When you make the $5.00 purchase, it goes through fine and you think everything is ok. Thinking you still have $5.00 since the first transaction cleared just fine, you go to several stores and make little $1.00 purchases. Each continues to go through just fine.

Little did you know that the first transaction incurred an overdraft fee of $30. Then all four one dollar purchases afterwards incurred their own $30 overdraft fees. That puts you at $150 in overdraft fees for spending a mere $5 more than was in your account.

The problem is that rather than deny the authorization when there are not enough funds, the bank just approves them and charges a fee for overdrafting. No notification takes place at all. This has consumers in an outrage.

With the revamping of our financial industry, consumers are taking the opportunity to vent to the Federal Reserve, begging them to fix the situation. The only problem is that banks would have to make up the lost revenue somewhere, likely causing free checking accounts to come with a monthly fee.

The irony in all of this is that consumer advocates pushing to ban payday loans are the same ones who pushed to deregulate banks and the financial sector. Spending $5 than you have can theoretically cost you $150 in overdraft fees. Just borrow $10 for a week from a payday lender and you would pay about $1 in fees.

Which option is the most cost effective for you to cover that little purchase or two? Should be a no brainer. Payday loans sure beat overdraft fees when it comes to short term financial needs.

Banks close early, and sometimes you need money in a hurry.  A good place to go for your check cashing needs is Check City.  The services are convenient and very affordable.  

Check City stores stay open much later than banks.  Most locations are open until midnight, and some are even open 24/7.  We know that it can be hard to get to the bank after work on Friday after work, because frankly, most banks are closed by the time most people get off.  We know that this is an issue and are pleased to be able to provide such easy check cashing services.   

Another way we make it so easy, is by cashing almost any type of check.  These include: payroll checks, cashier checks, government checks, insurance drafts or checks, money orders, tax refund checks (which could be very helpful this time of year!), personal checks, and out of state checks.  

This wide range of check cashing types makes it surprisingly convenient to get the money you need in just minutes.  To cash a check, just bring in the check itself and a picture ID.  When you bring these things to one of our conveniently located stores, you will fill out a quick customer information form, pay a small fee, and one of our friendly tellers will help you get your cash in just a couple of minutes.  

The best place to find check cashing services in Utah is at Check City.  Stop by one of our stores and you'll see the amazing serivce we provide.  

If you're looking to get some extra money fast, you should go get yourself a title loan from Check City.  It will help you to get the cash you need right away.

When you go into your local Check City, a helpful employee will guide you toward a solution that will help you get back on your financial feet once again.  A title loan is a loan where the title to your car is the collateral.  This means you hand over the title to your car to a lender for a few weeks.  The lender will then give you some money, and when you pay back that money, the title to your car will be given back to you.  It's simple!

When you become a borrower of a title loan, you need to make sure you will be able to pay back the debt before you leave.  The Check City employee should be willing to help make sure you will be able to, but you also need to take on the responsibility.  There are a few consequences when you aren't able to pay it back.  Obviously, the number one consequence is that you do not get your title to your car back, therefore making the lender the new owner of your car.  This is why it is so important.

However, a title loan shouldn't be a scary thing.  They were created to be a helpful tool to get people the money they need during a time when they can't go anywhere else.  For example, a title loan is good for someone who needs to pay a big bill off right away, so they don't incur overdue fees.

When you go into Check City, bring your car and title, along with a picture identification and proof of residence.  You will then complete a simple application form.  Your car will get a quick inspection, and then you will be awarded with your money that you can drive away with.  You still keep your car in your possession, but you leave your title to your car with the lender.  Using a title loan from Check City is a great way to get a lot of money really fast.

To better illustrate the ignorance behind the critics of payday loans, I have written this fictitious anecdote for your enjoyment. Hopefully the meaning jumps out at you.

Tom is a college student who rents a room from a house. He has four other roommates who also rent rooms from the house. Each month, the five students pay their rent to Rick, the owner of the home. Rick then uses the rent money to pay the mortgage on the house.

Tom was great about paying his rent, and his part time job as a waiter helped him pay all of his bills. Unfortunately, his rent was due three days before he got paid this month. Rick really needed them to pay rent on time because he couldn't afford the mortgage without their rent payments.

Tom decided to write a check to Rick anyway, hoping he wouldn't deposit it until after Tom's paycheck deposited. But Rick really needed to pay that mortgage on time, so the day after he got the rent checks from the tenants, he wrote a check for the mortgage and got everything taken care of.

Or so he thought. Tom's check didn't clear and bounced. Tom got slapped with a bounced check fee, returned check fee, overdraft fee and non sufficient funds fee from his bank. At the same time, Rick didn't deposit enough without Tom's rent payment, so Rick's check bounced and he got slapped with the same fees.

So not only did Tom have to now pay for his own $74 in fees from his bank, he had to cover Rick's $74 in fees as well. After getting rent eventually to Rick, who benevolently didn't enforce a late fee, and after paying off the other fees, Tom's paycheck was all but spent.

The ironic thing to Tom is that only two months earlier all payday lenders were put out of business by a new law. Normally he would have gone and just borrowed a couple hundred dollars for those few days and paid the few dollars in fees.

But lobbyists, consumer advocates and lawmakers decided that payday lenders were ripping Tom off, so they protected him by putting them all out of business. Thank goodness Tom only had to pay $148 in bank fees instead of the $6 it would have cost to borrow $300 for two days.

This story may be fictitious, but these things happen to all sorts of people everyday. Prohibit payday loans and more people will get ripped off by bank fees.

Recently, USA Today printed an article about how banks, not payday loan companies, are causing financial woes for their consumers. Banks continue to be considered the “stable financial standard”, while payday loans are the “evil” alternative. However, how much goes overlooked when it comes to bank fees and overdrafts?

The article cited two specific consumer experiences.  First, a 43 year old divorced mother of two was slapped with a $175 overdraft fees for small-dollar debit card purchases.  Small, as in coffee and lunch.  Similarly, a 33 year old had overdraft fees adding up to $400 within a few months.  She apparently kept very good tabs through her online account, but was still surprised with overdraft fees.  She stated that the fees "affected her (abilitiy to pay) groceries, gas money, everything you need to live on."

In a survey conducted by USA Today, it was found that, of the largest retail banks, none of them provide warnings for point of sale overdrafts to their consumers.  So, essentially, in the most crucial time for a consumer to know what fees will be incurred, there is no information given.  Individuals are unknowingly hit with relatively large fees.  

One of the beautiful things about payday loans is that the consumer knows beforehand exactly what fees will be added.  A lot of payday loan critics state that the short-term loans "target" unexpecting and incapable borrowers.  It seems that, at the very least, the payday loan industry provides the information necessary for it's borrowers to make informed decisions and knowledge concerning what exactly they will be paying.