Predatory Lending Traps

Everyday, payday loan stores, rent-to-own centers, check cashing stores, pawnshops and tax refund-anticipation, car title and more than three-year car loan lenders are unconscionably taking millions of dollars from the poor and financial illiterate, and often pushing them over the edge to financial ruin and bankruptcy.

On this link, we will be posting articles and videos to educate the public about these preditory lenders in the hopes that before entering into any of these transactions, they will analyze how much these loans will cost them and hopefully explore other alternatives.

These overviews prepared by S. Cary Forrester of CARE's Phoenix, Arizona Program will get you started:

1. Payday Loans
2. Income Tax Refund Anticipation Loans
3. Auto Title Loans
4. More Than Three-year Car Loans
5. Rent-to-Own Contracts

GENERAL ARTICLES ON PREDATORY LENDING:

• CNN.com: Predatory lending: There ought to be a law - Exorbitant interest schemes bilk the poor and the old. (August 19, 2005)
• MSN.com: 5 Dangerous Loans to Leave Alone - Payday loans may end up charging you up to 400% interest on your short term loan if you can't pay it back.

PAYDAY LOANS:

• New York Times: Seductively Easy, Payday Loans Often Snowball (December 23, 2006) - People are using payday loans as a short-term loan, when in reality, you could end up paying them off for years to come.
• Rochester Democrat and Chronicle: Payday lending stores can be risky business for the unwary (May 28, 2006) - Payday loans could send you in a downward spiral of fees and more loans if you are not careful.
• National Endowment for Financial Education Release: Are Payday Lenders a Good Deal? You Be the Judge - Your hard-earned money may be making someone else rich (October 14, 2002) - Some ways not to get sucked into the whirlwind of payday loans.

INCOME TAX REFUND-ANTICIPATION LOANS:

• Bankrate.com: Refund-Anticipation Loans can carry a high price (March 15, 2006) - These short-term, high-interest loans prey on the very people who can least afford them.

CAR TITLE LENDING:

• Bankrate.com: Car Title Lending: Short-Term Fix with Long-Term Expense (November 18, 2005) - A source for quick money that could end up costing you your car.

MORE THAN THREE-YEAR CAR LOANS:

• Rochester Democrat & Chronicle: Spending for Automobiles is Speeding Out of Control (May 10, 2006) - Stretched-out vehicle loans are increasing in popularity and decreasing our dangerously low economy.

RENT-TO-OWN CONTRACTS:

• According to a 1997 PIRG Rent-to-Own ("RTO") survey, (1) Nationally, RTO stores charge an average effective APR of 100%, although APRs are not disclosed; (2) RTO stores charge effective APRs ranging from 16% to 275% for televisions and refrigerators; (3) purchasing items via rent-to-own at RTO stores costs 2-5 times as much as purchasing the same items at department and discount stores....

PAWNSHOP LOANS:

• www.gottrouble.com Pawnbrokers & pawnshops
• The State University of New Jersey at Rutgers put together a Presentation (12 min. 4 sec.) covering the history of Pawnshop Loans, their use in American credit markets and other aspects related to this high cost, but often needed, service for certain segments of the US population....Their target consumer is cash-strapped families, particularly low- and middle-income households. They are considered a type of predatory lender because of the high interest rates and fees that are charged in many states.