Raising the pressure on payday lenders
By Mitch Lipka
An activist group dedicated to "economic justice" is launching a campaign to draw attention to the payday lending industry, which is known for extraordinarily high-cost loans made to those who can least afford them.
Americans for Payday Lending Reform, part of the grassroots coalition National People's Action, is planning to run a series of online ads focusing on industry practices and those who profit from the loans. Consumer groups have long tried to urge consumers to stay away from payday loans because of the onerous costs involved.
The Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) about a week ago shut down two schemes that allegedly stole money from the bank accounts of those in search of payday loans. The FTC also continues to advise consumers to consider other options rather than take a payday loan.
Payday lenders, for a fee plus steep interest rates, issue short-term loans that are essentially guaranteed by the borrower's next paycheck. The borrower provides the lender access to a checking account or leaves the lender with a check. Critics of payday lending say those who get them end up in a potentially never-ending cycle of having to borrow against their paychecks.
"The payday lending industry is the worst of the worst -- using predatory practices to take advantage of their customers," Liz Ryan Murray, policy director at National People's Action, said in a statement. "Creditors should help build wealth for working families, but payday lenders get rich by profiting off the most vulnerable. Our campaign will expose the ruthless greed and predatory nature of this industry."
Payday lending is also notorious for heavy-handed collection of borrowers' debts. ACE Cash Express, which has 1,500 locations in 36 states and Washington, D.C., was ordered in July by the CFPB to pay $10 million for allegedly bullying customers who were late on payments. Federal law tightly regulates how debt collectors can operate.