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Editorial - June 2003 |
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Stop payday lending |
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Published June 16, 2003 |
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Opponents of payday lending said Thursday that legalizing the industry again in North Carolina will punish consumers with “loans of mass destruction.” According to published reports, several consumer groups, including the state chapter of the AARP and the Coalition for Responsible Lending, spoke out against a bill pending in the Senate that would reauthorize payday loans in the state. We agree. Payday lending is simply a way for lenders to make money off the destitute. They need help, not deeper holes to fall into debt. State lawmakers allowed a previous law that authorized payday loans to expire in 2001. Since then, national payday lending chains have continued operating by using a loophole in federal bank laws. The law allows “rent-a-bank” agreements in which big payday lenders pair up with banks in states with lax lending laws. Lenders officially make the loan in another state to a North Carolina borrower. The bill limits borrowers to loans of no more than $300. Lenders could charge fees of up to 15 percent of the loan amount up to $40. Borrowers must be given at least 14 days and up to 60 days to repay the money. Under the bill, a borrower could write the lender a check for $300, postdated for two weeks later. The borrower would then receive $260 in cash. Critics of payday lending say too often the borrower returns to the business two weeks later, only to pay off the loan fee, tear up the old check and write a new check. That’s the problem. It becomes a treadmill. When borrowers don’t have the money to repay their loans, they borrow more. Then they pay more fees. There are reports that some borrowers, who start out getting loans under $500, soon find themselves nearly $2,000 in debt. Certainly there are occasions in this day and time when a pay check just doesn’t seem to come soon enough. But in time of crisis, earnest borrowers can go to family or friends for help. Many of the patrons of payday lenders are always in a crisis because they simply can’t manage their money. The lending service is just a useless crutch. The bill is now before the Senate Commerce Committee, which is expected to consider it next week. We hope they defeat it.
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© 2001 Lincoln Times-News |
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