“Pay Day” Loans Exacerbate Housing Crisis
March 24th, 2008Winding down…
Via: Reuters:
As hundreds of thousands of American home owners fall behind on their mortgage payments, more people are turning to short-term loans with sky-high interest rates just to get by.
While hard figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called “pay day loans” is growing as the U.S. housing crisis deepens, a negative sign for economic recovery.
“We’re hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments,” said Uriah King, a policy associate at the Center for Responsible Lending (CRL).
A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center.
The Center also estimates pay day lenders issued more than $28 billion in loans in 2005, the latest available figures.
In the Union Miles district of Cleveland, which has been hit hard by the housing crisis, all the conventional banks have been replaced by pay day lenders with brightly painted signs offering instant cash for a week or two to poor families.
“When distressed home owners come to us it usually takes a while before we find out if they have pay day loans because they don’t mention it at first,” said Lindsey Sacher, community relations coordinator at nonprofit East Side Organizing Project on a recent tour of the district. “But by the time they come to us for help, they have nothing left.”
The loans on offer have an Annual Percentage Rate (APR) of up to 391 percent — excluding fees and penalties. All you need for a loan like this is proof of regular income, even government benefits will do.
We’ve got one of those vampire-loan places operating in the same shopping center as the grocery store where I work. I think they should be illegal. There is already such a thing as credit cards which you can use for both buying things (even food at the grocery store since the mid-90’s) and cash advances, and pretty much anybody except total credit basket-cases can get one these days.
Study Says Payday Lenders More Prevalent In Areas Of High Christian Conservative Power
Oddly, the Bible forbids charging interest. The Bible also enjoins that all loans are to be forgiven and all real estate collateral is to be restored to the original owners every 50 years (in the Jubilee Year). Actually, I think all loans were to be forgiven every seven years. I guess I should look that one up.
“Christians” are oddly selective about which Biblical injunctions should be enforced and which ignored. The usual rationalization is that Christians need not adhere to Old Testament strictures–even though Christians will vehemently cite the Old Testament whenever it suits their purposes. As far as I know, the only Mosaic Laws you get to wiggle out of as a Christian, according to certain free passes, per Paul, are circumcision and keeping to kosher dietary laws.
I am of course not advocating a wholesale return to Mosaic Law, which might well involve a lot of stonings and a return to animal sacrifice. I’m just annoyed by the inconsistency.