KIMT News 3 – The payday loan industry has made millions off interest rates on loans. The Consumer Financial Protection Bureau is cracking down on the payday loan business.
They began supervising payday loans a few years ago. They are working on rules to provide protection for consumers, and have written a report that is critical of the industry.
It may be a quick way to get cash, but using a payday loan service can also cost you.
“Historically, interest rates are a real problem. In Minnesota there are caps in place and help to a degree. With online payday lenders, in many cases, those caps are disregarded, and consumers can find themselves in a pretty tough spot,” said Dan Hendrickson, a spokesperson for the Better Business Bureau (BBB).
Even with a cap, interest rates in the state can hit as high as 33 percent.
“These folks that seek out a loan are often in a tight spot to begin with, obviously. We always tell people that unless they’re certain that they can pay these loans off quickly, it’s probably better to look for alternatives,” Hendrickson said.
Alternatives that Hendrickson suggests include stopping by your local bank or credit union to take out a small personal loan. You can also see what checking account options are available.
“We have overdraft protection. It’s a line of credit that’ll kick in if their checking account is short,” said Peggy Manges, manager of the Trades and Labor Federal Credit Union in Albert Lea.
Manges said it is important to stop in your local financial institution to see what your options are before going the payday loan route.
“With us being a credit union, we’re member owned. It’s people helping people. We try to help people out in those situations, so they can find their way out,” Manges said.
She also tell us their interest rates average anywhere from 9 to 15 percent. That is half of what you could face using these payday loans.
The BBB says to be careful when investigating payday loan websites. Even if you are only looking into loans, and do not go through with it, phony collection calls could become an issue.
Do your research before committing to a loan.