NEW YORK (MainStreet) — Payday loans cost American families $3.4 billion in fees annually, according to the Center for Responsible Lending.
"These pay day loan predators are located in poor neighborhoods and close to military bases," said Terry Robinson, CEO for Sunovis Financial, a small business lender in San Francisco. "The correlation here is that payday loan companies tend to take advantage of the desperate and the poor."
As a result, many states are eliminating predatory payday lending or restricting the number of loans a borrower may withdraw in a year.
States that do not permit payday loans include Connecticut, Georgia, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Vermont and West Virginia.
"Consumers who choose short term credit should learn more about the lender they are borrowing from," said Amy Cantu, communications director with the Community Financial Services Association of America (CSFA). "Various lenders and lending models exist in the short term credit marketplace. There are good actors who offer a safe, reliable credit option, and then there are bad actors who seek to commit fraud and scam consumers."
An alternative to storefront payday lenders for some, FinFit loans are offered as part of an employee financial wellness program.
Before borrowing, workers complete a financial assessment, but FinFit loans are limited to employees whose employer is enrolled in the FinFit program because payments are payroll deducted over five months.
"When people use pay day loans, it's because they've experienced a challenge to their financial position," said FinFit.com founder David Kilby. "The only way to fix the problem is through education and development."
