Payday Loans

Marketed as a way to help consumers pay the bills until their paychecks arrive, payday loans trap consumers in terrible cycles of debt, dragging their families more deeply into financial crisis. In return for a loan the consumer provides the lender a post-dated check for the amount borrowed plus a fee. The check is held for one to four weeks (usually until the customer’s payday) at which time the customer redeems the check by paying the face amount or allowing the check to be cashed. Payday lenders encourage their customers to get on a debt treadmill by refinancing one payday loan with another. The fees for payday loans are exorbitant with effective interest rates that can top 1,000 percent.

The repeal of usury laws has allowed payday loans and other predatory lending to flourish.

Policy Analysis

Policy Briefs, Reports & Press Releases

• Press Release: Comments to NCUA on Payday Lending by Credit Unions and CUSOs, Sept. 26, 2011
• Issue Brief: 300% Bank Payday Loans Spreading, August 2011, Press Release, Group Comments, Sample Comments to the Federal Banking Regulator (OCC) Opposing High Overdraft Fees and 300% Interest Bank Payday Loans, August 8, 2011
• How Mississippi Municipalities Can Protect Their Residents from Payday Lending, Dec. 16, 2010
• Put Your Money Where the Shark's Mouth Isn't: Loan Options for Mississippi Borrowers That Are Better Than Payday Loans, by Leah A. Plunkett and Lauren K. Saunders, December 1, 2010
• Press Release: NCLC Applauds End of 650% MetaBank Prepaid Card Payday Loan - Other Regulators Should Follow OTS Action Against Similar Bank Payday Loans, October 14, 2010
• Runaway Bandwagon: How the Government’s Push for Direct Deposit of Social Security Exposes Seniors to Predatory Bank Loans Report, July 2010
• Press Release; Report Exposes Expense and Pitfalls of Some Payday 'Alternatives': Stopping the Payday Loan Trap: Alternatives that Work, Ones that Don't, June 2010
• Small Dollar Loan Products SCORECARD - Update: Scorecard Shows Consumers Pay Steep Rates for Small Loans, May 13, 2010
  Press Release and Statutory Backup
• Press Release: Bank Payday Loans... They're Baaaack: 650% APR Loans on Prepaid Cards and Bank Payday Advance Loans Flout State Interest Caps and Protection, June 2009

Letters

• Group letter to the Office of the Comptroller of the Currency (OCC) opposing Urban Trust Bank partnering with Community Choice Financial Inc. and its subsidiaries to facilitate payday loans on prepaid cards in circumvention of state law. Related materials: legal analysis and press release.
• Consumer letter to Congress on dangers of internet payday lending, May 11, 2011
• NCUA Letter Highlights Dangers of False Credit Union Payday Loan "Alternatives", July 30, 2009
• Letter opposing preemption of Arkansas usury rate, May 18, 2009
• Support letter for S. 582, Interest Rate Reduction Act, March 27, 2009
• Letter opposing payday loan bill, H.R. 1214 (Gutierrez), March 23, 2009 
• Letter in support of S. 500 (Durbin), establishing 36% national usury cap for all credit, March 2, 2009
• Letter to NCUA about credit unions engaged in high cost lending, Jan. 27, 2009.

Comments

• Comments on Interim Final Rule permitting direct deposit of Social Security and other federal payments to privately selected prepaid cards, Apr. 25, 2011
• Comments on NCUA proposed rule raising federal credit union usury rate for small loans, July 6, 2010
• Federal Credit Union Usury Rates for Payday Loan Alternatives - July 6, 2010 deadline to comment on the NCUA’s proposal to raise to 28% plus a single $20 application fee the rate that federal credit unions may charge for short-term, small amount loans.  Sample comments.