If you’re not already aware, payday lending, title loans, store installment loans, and online personal loans are plentiful and easily accessible. Consumers (borrowers) receive these short-term loans with the intention of covering their expenses until the next payday.
But these loans create a vicious financial cycle where you’re paying toward obligations that barely bring you even or using one loan to pay for another loan. This forces you to borrow more money and start the cycle all over again!
And it doesn’t end there…
It’s been well documented that these loans engage in marketing practices that target low-income families and communities of color already struggling financially. These lenders have been continuing this sort of behavior for a number of years. So much in fact that the federal government passed legislation (the Equal Credit Opportunity Act and The Veterans and Consumer Fair Credit Act) to counteract such practices in an effort to protect the consumer.
Predatory lending usually shows up in these ways:
*Low credit score acceptance
*Confusing and extensive lending documents
*Expedited fees and fines if a default occurs
*Refinancing options that create a new contract without payment rollover
Despite all of this, these lenders are quite good at avoiding accountability for these business practices because the federal, state, and local governments can’t go after all of them, there are too many of these companies in existence.
But when these lenders are caught and held accountable for their actions, they end up paying BIG to borrowers (sometimes millions of dollars in fines for violating various laws). When these companies pay, the fines are so severe it may force them out of business…YAY, but then they may also create a different payday business under a new name while claiming tribal immunity…Oy Vey.
It’s not all doom and gloom, there are ways to protect yourself.
Let’s be real, these businesses are not going to change their practices because targeting people who are barely getting by financially is too profitable. Not to mention we can’t rely on systems and laws to protect us all the time. So, when people won’t change, WE MUST CHANGE! If you’re in this situation you can do the following:
*Work with a financial coach
*Hire a debt relief company (Reliable Debt Consultants)
*Complete a monthly budget to have control over your money
*Invest in free money management software