----- Original Message ----- From: "Charles Brown" <CharlesB at CNCL.ci.detroit.mi.us> To: <lbo-talk at lists.panix.com> Sent: Monday, August 20, 2001 9:18 AM Subject: Re: America's low savings rate
>
>
> >>> lawrence at krubner.com 08/20/01 03:18PM >>>
> > > it means that many
> > > individuals have little or no savings, leaving them extremely
> > > vulnerable to unemployment and social security privatization
> >
> > But wasn't this always the case? Or is it now only a big deal
> > because the middle quintile is doing it too?
> > /jordan
>
> But isn't it important to get as many people as possible saving what they
> can? Don't you want people to have the relative safety of a few months
> income stored up somewhere? Or do you want to live in a country where
> everyone is just one step away from the brink of disaster?
>
> ((((((((((
>
>
>
> CB:
>
>
> Payday loans trap borrowers
> High fees, interest snare disadvantaged in a vicious cycle
>
> Donna Terek/The Detroit News
> Family medical expenses drove Douglas McCallum to get cash from five
payday lenders.
>
> By Gregg Krupa / The Detroit News
> When the mail arrived, Douglas McCallum noticed the all-too-familiar
return address: the hospital where his wife was a patient. McCallum opened
it, saw the figure under the words "payment due," and knew he needed help
like never before.
>
> "My wife got real sick in February," said McCallum, who supports his
family of four on a $21,000 annual disability pension. "The money wasn't
going far. Then, that hospital bill was for $13,000.
>
> "I had gone to one of those payday loan places before. But I never got
into them as deeply as I did, starting then."
>
> McCallum, a disabled railroad engineer, is one of millions of
low-income people who live from check to check. For them, unexpected
expenses are a major hurdle. When they seek credit to help them, they find
that borrowing is often far more expensive for the poor.
>
> Payday lending is a booming business in the United States, drawing
criticism from consumer advocates and attracting increasing attention from
government regulators. But it remains completely unregulated in Michigan.
>
> The loans are made by check cashers at annual interest rates as high
as 900 percent for a single week, or 450 percent for two weeks.
>
> Payday lending companies say they are providing a service, catering to
people who borrow on a short-term basis and repay immediately. But critics
compare payday lending to legalized loansharking. They say low income people
especially are drawn into a series of extremely high cost transactions that
continually return them to poverty.
>
> "There are two really unbelievable things going on here," said Jean
Ann Fox, the director of consumer protection for the Consumer Federation of
America. "First, the fact that state regulators have not nipped this in the
bud, directly. And second, that there are consumers so desperate that they
are willing to pay triple interest just to try to make it from paycheck to
paycheck."
>
> Payday lending was unheard of in Michigan 10 years ago, and that even
five or six years ago there were few such businesses operating here, state
officials said. According to the Attorney General's Office, there are now
about 650 outlets.
>
> In large part because Michigan does not regulate payday lending,
little information is available about the size of the business in the state.
But in states that have chosen to regulate them ― at least 17 states require
the lenders to be licensed or registered ― an enormous expansion is evident.
>
> In 1994 in Indiana, which licenses the payday loan industry, 11
companies operated 17 outlets that loaned $12.7 million. Last year, 117
companies operated 492 outlets loaning $510.3 million.
>
> Washington, which also licenses payday lenders, has seen a similar
explosion. In 1995, nine companies operated 44 outlets that loaned $6.7
million. Last year, 90 companies operated 287 outlets that loaned $580
million.
>
> Colorado officials regulate the businesses under the state's Uniform
Consumer Credit Code. In 1995, 236,181 payday loans were made statewide for
a total of $27.8 million. In 1999, the most recent year reported, 596,814
payday loans were made for a total of $86.4 million.
>
> A recent study of the payday lending industry in Illinois reported
that 21 percent of borrowers obtained at least 20 loans in a year. That
pattern suggests they are using one loan, at least in part, to help pay
another ― a strategy that, critics and customers such as McCallum say, keeps
them continually in arrears.
>
> "I got involved with five different ones here in town," McCallum said,
sitting in his legal aid lawyer's office in Saginaw. "Look, if you get $500
and you've got it for a month, and you're paying back $587, that's quite a
bite. But at least you've had that extra $500 to operate on for a month, you
know?
>
> "But, then, when you start getting involved with more than one of
them, before you know it, you're just out of the ballpark. I had almost
$2,800 in. You worry about whether they were going to come break your legs."
>
> Part 2: High interest or fee?
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