Cagey Consumer

Consumer Alert: Payday Loans Gouge Customers

You've probably heard the ads on TV or radio, promising you to help you out of a temporary cash shortage. "Payday loans" are a form of cash advance offered by some check-cashing services which have grown in recent years. But the charges for these services, calculated as an annual percentage rate, can be exorbitant... and it's not uncommon for customers to find themselves renewing the cash advance every pay period. Check Penn State's Consumer Issues for a description of how these services operate.

These short-term loans can look like a good deal to someone who would otherwise pay bounced-check fees or late charges on rent, but the real lure may be the ease with which they're obtained.

Once upon a time, finance companies would provide loans at the legal limit under state usury laws, typically about 36%. While many people thought this rate was usurious, the payday loan industry has succeeded in changing the laws so that they can charge an APR which is many times this.

But obtaining a payday loan isn't only a very expensive way to borrow, it keeps the borrower from building a good credit history which would eventually make it possible to get a loan from a credit union or other financial institution at much more reasonable rates

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Payday Lending Services

The businesses listed below are all believed to engage in usury by offering "payday loans". Consumers are advised to avoid the businesses listed below and any other businesses offering usurious loans. Are there any good payday lenders? Not that we know of. If you know of one, please let us know. Financial Services page

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Updated June 10, 2004