Another drama involving payday loans is played in Indianapolis. But the question is who is to blame for what’s happening. Whether companies for fast loans or consumers who can not make their account and calculate their income correctly. Everyone wants to have quick and easy money on time, ostentatious in moments when we have to buy something. But the essence of quick loans is not to satisfy our momentous whims but to really serve us in emergency and urgent situations of a need for money.
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Cost of Living: Payday loans leave some Hoosiers bankrupt, attorney says
The story happens in Indianapolis – Payday loans, even a small amount, could end up costing you thousands in the long run, according to Indiana financial experts and a south side man who ended up filing for bankruptcy as a result of payday lending. Mike Webb, a recruiter who lives on the south side, has been dealing with the impact of payday lending for the past decade. Webb was a little behind on bills back in 2007 and needed $400 to make a car payment.
“I saw an opportunity to get a payday loan,” said Webb.It was a quick and easy opportunity to get some money to pay the bills. Click To Tweet
Webb handed over his bank account information to the payday lender and got money fast.
“It was instant gratification because the bill was paid and I felt great,” said Webb.
“I took another loan to pay that off, and then another loan to pay that off,” said Webb. “Then it just downward spiraled from there.”
The interest, finance charges and fees all added up, and Webb ended up $12,000 in debt.
“When all was said and done, my checking account was closed because of so many overdraft fees,” said Webb. Webb ended up filing for bankruptcy.
At the Neighborhood Christian Legal Clinic, staff attorney Matt Gaudin helps clients for bankruptcy.
“At least half of the clients I file bankruptcy for have payday loan issues,” said Gaudin. “They get stuck in the trap of payday loans because the interest rates are so high, and then they have to take out new payday loans to cover their previous payday loans, and then it leads to a vicious cycle where they go back to these places every other payday.”
Interest rates can run as high as 400, 500, even 700 percent, Gaudin said.
“It’s a major problem in Central Indiana,” said Gaudin.
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This including a “full payment test” before giving the loan, which means they have to determine if the borrower can afford to repay the loan in full with interest within 30 days. However, the new rule is expected to face resistance in Congress and the payday lending industry is fighting back. Meanwhile, The Hill posted:
Congress must heel rogue financial watchdog
The Consumer Financial Protection Bureau (CFPB) released a new rule focusing on alleged “debt traps” caused by payday loans. It is hard to know exactly what is in this 1,590-page rule, but it includes a “Full Payment Test” requiring lenders to “determine whether the borrower can pay the loan payments and still meet basic living expenses and major financial obligations both during the loan and for 30 days after.”
The coin always has two sides, a matter of time and see how things will develop with the new rules on quick loans and whether this will bring about the desired positive change.