I've just read two very damning articles sent to me by a reader of this blog about Payday Lenders. The 1^st article from the Dallas Morning News, involving the local government of Mesquite, Texas's decision to minimize the number of Payday lenders within 1,000 feet of a similar business, and each must be in a freestanding building at least 200 feet from residential areas and 500 feet from freeways, a month after Richardson, Texas imposed similar restrictions due to some of the lengths that predatory lenders will go to generate revenue.

The ordinance the council adopted Feb. 18 requires payday lenders, check-cashing locations and title loan companies, which make loans backed by borrowers' car titles, to obtain a permit before they can begin operating.

The 2^nd  article from the Wall Street Journal taking place in Dothan, Alabama where lenders have been making high-interest loans, secured by paychecks, and increasingly targeting recipients of Social Security and other government benefits, including disability and veteran's benefits.

The law bars the government from sending a recipient's benefits directly to lenders, so the lenders have worked out relationships with banks to deposit the funds and then send the entire amount to the lender, where lender then subtracts debt repayments, fees and interest, before giving the recipients the residual, thereby making the individual even more reliant on the lender for future funds.

It appears although industry groups, such as the Center for Financial Services Innovation (CFSI), which I have not always been supportive of, The FDIC, and a number of banks are attempting to educate the consumers a group of unscrupulous lenders still go after those in our country more susceptible to these types of tactics, or those individuals in dire straits making an impulse decision that ultimately creates a self fulfilling prophecy where the more availability you have to these types of lenders, the more you use them.

There are a couple of schools of thought that come to mind, the most pronounced, is the legal argument "buyer beware", where the onus of your actions are directly attribute to how you involve yourself in these types of endeavors, and the other, that government should not regulate business. Both are valid, but there comes a point in time that you have to educate the consumer, and if education does not stop abuses of this nature, then legislation should dictate acceptable use policies.

Case in point, if a bar serves a customer alcohol, then the customer becomes unruly, and gets in an accident after imbibing, then the bar is at fault because they were in a position to intercede on behalf of the drunken customer. Likewise, if those in our community do not have the education to understand an impact a 400% payday loan will have on their household finances, as well as budgets, then there needs to be an action that should assist those individuals from harming others in their family through poverty because of an uninformed decision made in a financial panic.

I have been in a business that supported the underserved or unbanked communities through our kiosk program. We were in a position to electronically process payments, charge fees, and dispense pre-paid cards that in turn could be enabled with small lines of credit. Like a number of reputable companies in the Alternate Financial Services business, our fees were reasonable, and our service was widely herald as beneficial to the community.

Without some sort of regulations, preferably by those groups that have nothing to gain, we can bring respect back to a service that under the right circumstances has merit.

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Mark Hill: Alliance for Economic Inclusion Members teach class

As many of you know, I belong to an FDIC supported organization named the Alliance for Economic Inclusion - a number of our members are banks, and each one has a financial education course that they offer, most free of charge.

We are in the midst of developing an Alliance for Economic Inclusion web site for the forum where we will post more information.

On a side note, if anyone wants to volunteer assistance with keeping the site information accurate, please let me know.

Each of our member banks has their own web site with information about their services. I would recommend that people with similar issues look into contacting their bank or send me a private email to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it and I will forward you a list of contacts, or classes as they are scheduled.

1

March 06, 2008

bambi: I used a check casher once

After I graduated from college, I was issued a high interest credit card - my 1st. I went on a spending spree and racked up about $2500 in charges. Each month I paid the minimum.

My parents could not afford to help me, so I went to a check casher that had short term loans similar to what you mention in your blog, but they called it something else. If I remember correctly, I had to pay $150 down for the loan processing fee, which was rolled into the note, plus $125 a month for 36 months. After paying $125 a month for almost 2 years and still owed over $2,200

My fiance, now my husband, told me about a financial class the bank where he worked was offering to the community for free.

I was so embarrassed, but I learned how to balance a check book, understand finances, and also get a “starting over” loan from the bank – it was 18% but it was still lower than the fees I was paying the check cashing company.

I would recommend that anyone reading this check out a Financial Ed class in their community.

By the way, they are no longer in business. I wish I could say that they were closed down, but I was told that a larger company bought them for a small fortune.

2

March 06, 2008

Ogis: Sleeze bags

Gees - this is horrid.

Fines won't help - they will only pass the cost on to the customers that use their services

3

March 06, 2008

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