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Loans on the line

Here’s one thing that President Obama and former Governor Mitt Romney agree on: the critical need for America to start and to grow businesses. But how do you get started if, like many Americans, you can’t get a bank loan?

For that matter, what if you needed credit just to pay your bills and couldn’t get it? For some 19 million households, the answer is payday loans. These loans give otherwise unqualified borrowers access to credit — but at extraordinarily high interest. Annual rates can top 400 per cent. Consumer advocates call them “predatory.” Payday lenders say they provide vital help to folks who otherwise couldn’t get any help at all.

In Missouri, there’s an effort to put an initiative on the ballot this November that would cap payday loan interest rates, as 17 other states already do. But will capping rates mean no credit at all for some Missourians? Stacey Tisdale reports.

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  • Anonymous

    I watched tonight’s segment of Need to Know, and thought it one of the worst news programs I have ever seen anywhere except Fox News. The issue was payday lending, and the interest rates charged. The program focused on an initiative Missouri attempting to limit the interest rates these people can charge. Aside from a bunch of do-gooders, including, of all things, a Catholic priest, the most sensible and coherent segment was an interview with a provider, who said simpy that if the interest rates were limited to 36% he would cease operations, and the people who rely on these loans would be out of luck. Since there are many states that limit interest rates on such loans, it would have been interesting to find out what has happened in those states. Have payday lenders disappeared? If so, how are the people who normally rely on them faring? This issue was obliquely referred to by an exceptionally incoherent interview with a NY Times reporter.

    The payday lending industry appears to be fully competitive, in which case prices should trend to marginal costs.Perhaps default rates are so high that high interest rates are necessary. In any event, I thought the report wildly unblaanced,and, in the end uninformative as to the funadmential issued.

    By the the way.I am not a Tea Party type. I am a liberal Democrat and a substantial supporter of my local station, WNET. You can check me out.

    I think reports like this do a tremendous disservice to PBS, and fuel the right wing claims of “liberal bias”. Your should do better.

    I would much appreciate a response to this diatribe. I think I have earned it with my contributions.

    Joseph H. Weber
    ).O. Box 126
    Oldwick, NJ 08858

  • Panto2001d

    I used this service to my detriment, I got out of the loan thru bankrupcty it was my fault to get the loan in the first place. But my bank won’t give me a small loan even thogh I have direct deposit and have banked with them over 8 years, thanks a lot chase.

  • jan

    Actually, these places need to be made illegal and shut down.  It’s usury and its vulturism.  That said, another poster on this subject says they capped it in her state and they’re still in business. 

    In the meantime, it can’t hurt if you drive past these places or see their signs with the kids in the car to make a game of getting the kids to point their finger and yell “rip-off”, “cheaters”, or any other word you think acceptable to imprint on their subconsciousness to avoid ever going to these people.  A follow up would be to tell the kids that if they ever need money when they’re older to come to you first.    

  • Anonymous

    It’s unbelievable that this is legal at all. You can get better points on a loan from the mafia.

  • Maureen Craig

    What about staggering the interest rates? For example, a state could put a 200% cap on payday loan rates through the first month of the loan, but after the first month all additional interest would be assessed at a rate of no more than 36%. If what the payday loan industry implies is true, and most payday loan users pay their loans back within a short period of time, then the industry can still make a profit. However, those payday loan users who can’t pay their loans back within a month aren’t burdened with a ridiculous debt; instead, their debt is somewhat higher than they would have with a subprime credit card, but not impossible to get out of.

  • Karen from Brooklyn

    You ask ” what if you needed credit just to pay your bills and couldn’t get it?”. Some would answer that payday loans are the answer. But think about it, the very name of these loans “payday loans” would imply that the borrower has a payday and therefore has a job, with a steady-enough paycheck to warrant a loan on the imminence thereof.
    I would ask “why do 19 million households in America have so little income at the end of a pay week, that they have to resort to loans to pay their bills in the first place”
    The answer isn’t loans, it is clearly pay. People should earn enough at work to be able to cover basic expenses and needs. That is what minimum wage was supposed to be for. Unfortunately minimum wage has not kept up with inflation when you factor housing and healthcare in. Not even close!
    Poor people, especially poor working people are the most vulnerable among us. Federal and state governments need to step up to the plate and raise minimum wage to some sort of realistic living wage!
    Your report, focusing on loans for the working poor, missed the mark!

  • guest

    ‘The critical need for America to start and to grow businesses. But how do you get started if, like many Americans, you can’t get a bank loan. None of these so-called banks give loans.
    Payday Loan lenders say they provide vital help to folks who otherwise couldn’t get any help at all.
    These loans give otherwise unqualified borrowers access to credit- but at extraordinarily high interest.
    Politicians say whatever they want to get elected. But in reality, the American Taxpayers are the ones who suffer the most.  So Payday loans is not the answer. .
    Payday loans make money at the cost of others. How does it help the American Taxpayers?
    We cannot outsource loan business.