As states continue to crack down on payday loans, the payday lending industry is attempting to make a case for itself in the media, spewing out press releases when states take action to curb the usurious loans.
After the Colorado legislature passed a measure capping interest rates at a mere 45 percent, a Web site called aboutpaydayloan.com issued a press release taking issue with some of the measure's provisions. Specifically, the site took expection to the requirement that lenders give borrowers six months to repay the loan instead of the typical two weeks.
After all, it is hard to fathom why a six-month loan would be any more helpful when you only need a little cash for a car repair, or until payday, the press release observed.
The reason you need at least six months is, if you're living paycheck to paycheck, it's going to take a long time to repay the loan, said Uriah King, VP for State Policy at the Center for Responsible Lending. If you're borrowed $500 you don't have, how are you going to be able to pay it back out of your next paycheck? The answer is, you can't, so you have to take out another two-week loan. That's the debt trap.
The press release claims that "reputable" payday lenders are pulling out of Colorado and other states that are cracking down on the industry, leaving consumers to the tender mercies of unscrupulous competitors, though it's far from clear what separates a reputable payday lender from an unscrupulous one.
It's not clear who or what operates aboutpaydayloan.com. It appears as some sort of blog, where anyone can post content. Most of the postings are anonymous, identified only as admin.
The ongoing scam in which a bogus debt collector harasses consumers over a phony payday loan debt also gives payday lenders the opportunity to associate themselves with law enforcement.
Pay1Day.com, an online lender, issued a press release associating itself with Illinois Attorney General Lisa Madigan's recent Scam Alert. There was no official connection between the two, but Pay1Day.com said it was passing along the attorney general's warning as a "community service."
Despite attempts to show a softer side, Charlene Crowell, Communications Manger for State Policy at the Center for Responsible Lending, doesn't think it will work.
When voters have a say on payday lending, they usually reject it, Crowell told ConsumerAffairs.com. When the legislature gets involved, they usually have trouble getting pro-payday loan legislation out of committee.
Two organizations promoting payday lenders in the south BorrowSmart-Alabama and BorrowSmart-Mississippi, happen to be located in two of the most lucrative states for the payday lending industry, at least when it comes to number of borrowers. Both groups offer financial advice, but King says consumers shouldn't be fooled.
Unless they tell you 'don't ever take out a payday loan,' I don't think I would be taking financial literacy advice from payday lenders, King told ConsumerAffairs.com.