Category: Holmes,Oliver Wendell, Jr.
BLEEDING THE ALREADY INDEBTED DRY
“The case for capping payday loans is overwhelming,” writes Stella Creasy in the Guardian.
The Consumer Finance Association boasts that it has “intelligent financially-savvy consumers who are making critical, proactive and positive financial decisions every day to help them live within their means whilst coping with the varied challenges of the post-credit crunch era.”
But how financially-savvy can you be to accept loans that sometimes reach 4,000%? Creasy reports:
The Citizens Advice Bureau tells a very different story. They deal with the fallout of a country where companies offering loans with rates of 4,000% cover every town centre and dominate internet and mobile phone advertising. Their experience is of an “out-of-control industry”, that has been lending to those under 18, people with mental health issues and even people who were drunk at the time of application. They speak of lenders not doing basic credit checks, and the harassment of borrowers to extend loans and repay quickly.
Those caught in this payday loan cycle have little way to get out.
Yet one in three of these loans are being used to pay off another payday loan – showing how using this credit often creates a spiral of debt. Many know such loans are toxic but have little alternative.