Critics say businesses target people who can least afford to borrow
Consumer and legal advocates met with the public this month to inform citizens about the effects of using payday loan businesses and to give them alternatives to borrowing from them.
Critics have maintained that, in many US states, the payday loan industry's monthly interest rate of 5 percent and its loan fee of $5 per $50 borrowed, preys on people desperate for quick cash. Many borrowers, they say, end up on a debt treadmill and file for bankruptcy.
Shane Harris, a Legal Aid Society lawyer, said the businesses are expected to generate $20.4 billion this year and $30 billion next year.
Harris found that 10 payday lenders in Ohio filed at least 881 cases against borrowers in Dayton Municipal Court between January and September this year. Half of the cases, he said, were listed as default judgments against the borrowers.
Harris said alternatives to taking out payday loans include services offered by the state's Prevention, Retention and Contingency program and the county's Supporting Council of Preventive Effort.
Consumer Credit Counseling Service in Dayton conducted a three- month survey beginning this summer and found:
* Twelve percent of the 800 clients the agency served had taken out a payday loan.
* Fifty-seven percent said they still owed money to one or more of the companies.
* The average amount owed was $496.
* Fifty-seven percent said they were aware of the "high interest" of loans.
Rob Franks, the agency's director and a member of the panel, said payday loan businesses target people who can least afford to borrow.
"What we're finding is that they have the best intention, but in two weeks they're in no better shape. They've got to use that paycheck in two weeks to pay other bills. There has to be another answer, though I'm not sure what it is," Frazer said.