“That’s just evil,” Adam said when I read from to him some of payday loans statistics in Prism Magazine (March/April 2011 article by May L. Sherman).
I think you will agree.
“More payday lending stores exist in the US today than all McDonalds and Burger King fastfood outlets combined. The industry’s dizzying rise–just since the 1990s–is explained by both the high demand for quick cash and the significant profit to be made in offering it.”
“Triple-digit interest rates are the norm, with the national average at 419 percent APR.”
“A single mom in Arkansas working full time faces an unexpected car repair and needs $500 quick. Eight months later, she has paid $2,240 in interest and rollover fees to her payday lender.”
“Sandra Harris, a disc jockey profiled on 60 Minutes, took out a $500 payday loan to cover her car insurance bill when her husband was laid off and money was tight. Over two years, the couple borrowed $2,510 from payday lenders–and paid $10,000 in fees.”
“According to research from the Center for Responsible Lending, on average a customer borrowing $300 will pay back $800, with $500 going toward interest and fees.”
Payday loans often require people to pay back loans in entire lump sums, a trap that keeps many people on tight paychecks from ever paying anything on their loan. The author compares it to the way many people in the world end up selling themselves (or children and relatives) into slavery. She’s right–this is not far different from slavery.
That’s all the bad news. It’s evil, bad news.
Here’s good news. The article goes on to explain church-based programs that meet people’s need for quick cash in better ways. The need for emergency cash is real and inevitable for people in poverty the world over. But it doesn’t have to be lent with skyrocketing interest, bait and switch advertising, and a profit-motive to drag people further into debt sandpits.
Instead programs like Grace Period in Northern Philadelphia include firm but compassionate methods to teach people regular savings habits so that they won’t need payday loans. They don’t require people to pay back loans in entire lump sums. Instead people sign for a relatively low monthly direct deposit to slowly pay back the loan plus dues that they will later receive back. After about 12 months, the loan is paid off but deposits continue in order to build up a cushion of savings and develop the discipline of saving for emergency needs.
It’s brilliant, it’s working, and it happened because a bunch of people refused to stand by for unjust systems.
I sure would like to see someone make one of those in my own city.
I guess I have my back-up plan for work if my Ph.D. doesn’t work out…