10 Reasons Payday Loans Should Be Banned
Most of us can recall being in a financially difficult situation. For many people, it only takes one unanticipated expense to cause significant financial distress. Payday loan companies are structured to take advantage of this sudden need of an influx of cash. Payday loans, or cash advances, as they are also commonly called, grant the borrower a sum of cash that must be repaid on his or her next payday, along with fees and interest. In theory, it seems like an ideal arrangement. The borrower gets the money he or she needs
, when he or she needs it, and the lender makes a profit from the exchange. In practice, however, things work very differently. Unbelievably high interest rates and other fees, along with the borrowers own financial situation, can often make repayment virtually impossible. Taking out yet another advance, or rolling the loan over, is often the only solution available.
Payday loan companies have rightfully been called out in recent years as predatory lenders, for this very reason. Despite past and pending litigation, and an increase in consumer awareness, it’s still a thriving industry. Part of the reason is that the current economy has caused a number of people to fall into financial distress. For those people, payday loans seem like an attractive, albeit short-term, solution to a desperate problem. Attempts at industry regulation and consumer education have failed in a number of states. The best long-term solution to the problem caused by payday loan companies is to ban them altogether, for the reasons outlined below.
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