You know the ones. They flood the TV airwaves and fill your e-mail inbox with ads promising fast, painless cash to tide you over until the next pay check, pension check, tax refund, or structured settlement comes. They tout themselves as lending a helping hand if you’re short of money. They approve your credit instantly; no waiting. They promise fast, easy, painless cash.
If it sounds too good to be true, that’s because it is.
In reality, these “payday” loans are a very bad deal. The lenders charge usuriously steep interest rates (sometimes as high as 600% APR). As a condition of the loan, lenders get direct access to your bank account (a post-dated check or electronic authorization) and they take their payment and fees the minute your check is deposited, before you can pay your rent or oil bill. They specifically target seniors with direct-deposit of social security checks.[i]
They are, in a word, unscrupulous.
And Mainers know it.
In a recent poll, a majority of Americans surveyed viewed payday lending practices with suspicion and dislike. Northeasterners in particular support stronger regulation of the payday loan industry. Polling results include:
- Nearly three-quarters of northeasterners polled (73%) support a cap on the amount of interest payday lenders are allowed to charge.
- 83% of northeasterners would support a proposal that requires payday lenders to verify a borrower’s ability to repay a loan.
- 82% of northeasterners support requiring payday lenders be required to check a borrower’s ability to repay a loan within that loan’s stated time period (the highest level of support of any region of the country).
- 73% of northeasterners polled strongly oppose payday lenders having access to borrowers’ bank accounts.
Not all lenders use these tactics. Payday loans can be convenient. Instant credit may be helpful if you are trying to rebuild your credit rating and can pay off loans quickly. And Maine has strict consumer laws to protect our citizens. But there are dishonest lenders who are not located in Maine and not licensed here. They ignore Maine laws. They are abusive and threaten borrowers with arrest and imprisonment. They slip through the cracks and are difficult to find and prosecute.
That’s why we need strong federal action to protect payday borrowers. The federal Consumer Financial Protection Bureau is considering stricter regulations of payday lenders. MECEP supports these efforts and we know from the polling data that Mainers do too.