We’re glad to see the spotlight on dangerous payday loans. John Oliver recently did a withering take-out on unscrupulous payday lenders that charge interest rates that can reach 850 percent, or more, and essentially force you to take loan after loan.
Typically, the small amount of money you borrow online or through a storefront payday lender may get you through a rough patch. But you’re likely to end up deeper in debt than when you started. The Consumer Financial Protection Bureau (CFPB) says 75 percent of people who borrow once borrow again and again.
Many of our readers ask about companies like Cash Mojo. You can draw your own conclusions. But it appears to be a referral service for payday lenders. And just remember, with these guys there’s no easy answer regardless of what they say.
Back to John Oliver. The comedian looked at the staggering interest rates and said, “Even the most demanding football coaches only ask for 100 percent.” He also focused on Texas lawmakers who protect the biggest payday lenders in the country.
Some states do have laws banning usury and limiting outrageous interest charges. But companies get away with marketing in those states with their online lending offers.
New York State has aggressively gone after payday lenders who work the Internet to hook people who think these loans will answer their prayers.
Recently, Attorney General Eric T. Schneiderman reached a settlement with Forster & Garbus. The company collects debts for payday lenders and Attorney General Schneiderman got them to agree to stop payday loan collections against New Yorkers. The maximum interest rate allowed in New York is 16 percent. But Forster & Garbus collected on loans that topped 850 percent.
Attorney General Schneiderman said, “Debt collection firms must make certain that the underlying loan is not a payday loan before filing a lawsuit, and they will be held responsible if they fail to do so. Ignorance is no excuse.”
But payday lenders don’t quit marketing and they spend a lot to get you to borrow. It’s easy to say, “Don’t do it.” But think of it as jumping into shark-infested waters. It’s dangerous.
You might also check out what John Oliver had to say.