A front page article from yesterday’s (6/4/2020) Wall Street Journal sheds light on a problem many Coloradans encounter at some point in their lives: predatory lending. The article, “Payday Lenders Sidestep Ad Bans, State Restrictions” by Coulter Jones, Jean Eaglesham, and AnnaMaria Andriotis, explains how these abusive lenders are profiting from the coronavirus pandemic. Here are some essential quotes:
“Lenders that target struggling borrowers for loans with triple-digit interest rates have overcome yearslong efforts to restrict their lending and are pitching their products to consumers in need of cash during the coronavirus pandemic.
They sidestepped state crackdowns by joining with out-of-state banks to offer loans and now are bypassing ad bans put in place by Google, which calls their offerings ‘dangerous financial products,’ and Facebook Inc., a Wall Street Journal investigation found.”
These loans “typically carry annual percentage rates of around 200% to 500%” and prey on consumers with bad credit scores. More from the article:
“The lenders came under fire in many states because their high-cost loans left borrowers in a debt cycle, said Alex Horowitz, a senior research office at Pew. States such as California and Colorado cracked down, but the lenders bypassed their restrictions by joining with banks from states where there are no interest-rate limits to make the loans…High-interest lending grew in recent years despite a strong economy and low unemployment.”
The story goes on to share the story of Izetta Ferguson, who needed $1,500 for a vehicle repair, and searched “help with my loan even though my credit isn’t good” only to be matched with a company that issued her an 11-month loan with an annual percentage rate of 298%. “The cost of the 11-month loan was $2,990.54,” according the article.
Izetta, and folks with similar challenges all over the country and in Colorado, are often faced with an unsettling choice: engage a predatory lender or find a way to live without the money. While laws that have restricted payday lenders are a step in the right direction, they do not answer the more important issue: where do people who need money go if they do not have savings? High-interest debt is often their only solution. Predatory loans such as this one are common, but far more common is the use of credit cards to meet cash needs, which also leads to a debt-cycle that profits financial companies and locks Coloradans in financial scarcity for years.
We can work together to provide every employed Coloradan access to loans at 8% interest, regardless of credit. This is a tiny fraction of what predatory lenders charge and one-third of common credit card interest rates. Please reach out to me to discuss how we can provide a viable alternative to the predatory lenders and put them out of business forever.