Criticism of payday loans generally focuses on the astronomically high interest rates and the lenders' sales tactics. For example, the annual interest rates for the loans at the center of the case we have been discussing worked out to 139 percent. Many payday lenders will lure borrowers into multiple short-term commitments, granting loan after loan, turning a financial emergency into a financial disaster. It looks like a helping hand at first, but the lender is poised to kick the borrower when he's down.
We are talking about a 7th U.S. Circuit Court of Appeals decision involving a payday loan company. The plaintiffs, three Illinois residents, had each borrowed money from an online payday lender. The lender was one of a handful of companies operated by one man. The plaintiffs alleged that the loans violated both state and federal lending laws, including usury laws and the Illinois Consumer Fraud and Deceptive Business Practices Act.
The payday loan industry sometimes seems impervious to corrective action. These are the companies, Internet-based for the most part, that give individuals who are in dire financial straits a quick infusion of cash. The borrowers agree to pay the loan back in a few weeks for what seems like a modest interest rate. The problem is that the interest rates are not moderate -- annualized, they can exceed 100 percent -- and the lender continues to offer "incentives" for the borrower to take out loan after loan after loan. The result can be a total financial meltdown.
For those of us who wonder if we are just borrowing trouble by worrying about medical debt, a recent survey says we are not the only ones who think about it. Bankrate.com has published the results of its monthly Health Insurance Pulse, and it seems that many of us are struggling with medical debt and more than half of us worry about it.