By on August 11, 2014
Last night John Oliver spent over 16 minutes of Last Week Tonight unpacking the atrocities of payday loans, one of the most flat-out pernicious industries in America.
Payday loans are quick, short-term loans meant to cover unexpected emergencies that are to be paid back with the borrower's next paycheck, hence the name. One in 20 households has taken one out at some point, it's a $9 billion dollar industry, and, most astonishing of all, there are more payday loan outlets in the U.S. than there are Starbucksor McDonald's. Believe it.
But it's not as simple as helping people out of a jam and getting paid back the next time a paycheck comes in. Payday loan companies are so lucrative because they trap borrowers in a vicious circle of debt that's nearly impossible to get out of. Oliver shows a montage of news footage reporting astronomical interest rates, some of which can climb as high as 1900 percent annually. Yes, it's a short-term loan, but if you can't pay the money back by the next pay period, you’re basically fked, and three-quarters of borrowers do in fact need to re-borrow to pay off the initial loan. Companies advertise that it's not a big deal if you can't make a payment and that they'll help you work it out, but all they'll offer is another loan, which only compounds how much you owe. As Oliver notes, "It's not often that a metaphorical slippery slope costs as much as an actual ski vacation." Or, if you prefer: "Payday loans are the Lay's potato chips of finance: You can't have just one, and they're terrible for you.”
The most stomach-turning part of all this is how shamelessly payday loan companies will circumvent whatever feeble regulation happens to get passed so they can continue to ruthlessly take advantage of people who need help. For example, in 2008, Ohio managed to cap loan rates at 28 percent for any short-term lender. The solution? Register as "mortgage lenders" instead of short-term lenders. Yes, $300 mortgages. Come and get 'em.
The bottom line is that payday loans aren't going anywhere. Too many people are making too much money. People need to make sure that borrowing money from Cash America, or the Cash Fairy, or Ace Cash Express, or any other payday loan outlet is an absolute last resort. Pawn your possessions, get a few bucks from your rich uncle, or, as Sarah Silverman notes in a PSA at the end of Oliver's piece, even get paid to defecate on someone, which makes more sense than taking out a payday loan. Watch below:
No comments:
Post a Comment