Loans: A Growing Business
with Growing Fees
loans, cash-advance loans, postdated check loans, delayed
deposit check loans, payroll advance, or deferred
deposit-- whatever name you use, it's a one billion
dollar business in the U.S.
Payday loan businesses
give cash advances on paychecks and make money by
charging a fee. The payday lender agrees to write a
pre-dated check for $115, for example, for a $100 cash
advance. The customer and the payday lender both
understand there are insufficient funds for the check to
clear, but payday is next Friday. Then when next Friday
comes, the customer can either pay the $115 in cash,
allow the check to be deposited, or renew, or "roll
over," the loan until the next payday in
two weeks (and pay another fee).
There are few limits to
what a check-cashing outlet can charge for cashing a
check. Consumers could end up paying 261% APR to
913% APR. Unfortunately, the most affected by
these high fees are low to moderate-income individuals.
Instead of payday loans,
your Credit Union can offer a smarter solution. Feel free
to call and talk to one of our loan representatives at 330-493-7602.