Analysis by Allison Morrow, CNN Business
Most people are, understandably, rather grumpy about soaring prices for gas, food, and just about every essential item you can think of.
There is, however, at least one industry dancing on the grave of our sustainable incomes: predatory payday lenders.
Here’s the deal: Payday loans, aka cash advance loans, are the kind of short-term bridge that can feel like a lifeline when you’re living paycheck to paycheck. But they come with criminally high interest rates, often over 500%, depending on your credit and income. And our current economic climate – marked by high inflation and low unemployment – is exactly the kind of environment where these lenders thrive, my colleague Nicole Goodkind writes.
Buy now, pay later is the latest rage – here’s why it can be dangerous
What is happening
But it’s also easy to see why people get desperate:
- Inflation in the United States is the highest in 40 years.
- Gas is hovering around $5 a gallon, more than 60% more expensive than a year ago.
- Across America, bosses are calling workers back to the office, which means more driving.
- The federal minimum wage, meanwhile, still sits at $7.25 an hour, where it has been since 2009.
- About two-thirds of Americans live paycheck to paycheck, according to a survey. (This figure jumps to 82% among workers earning less than $50,000.)
- People with subprime credit scores (below 650) find it difficult to get a loan from a regular bank or qualify for credit cards, leaving them with few options when money is tight .
- To hear predatory lenders say it, they provide services to low-income communities by providing loans to people that traditional banks have turned down. High interest rates are necessary because of default risk.
Consumer advocates call BS.
“There are 18 states and the District of Columbia that have banned payday loans and have survived very well without these predatory loan products,” said Nadine Chabrier, senior policy adviser at the Center for Responsible Lending. “There are fair and responsible loan products that have low interest rates and fees that are available for people to use.”
Read Nicole’s full story here.
The-CNN-Wire™ & © 2022 Cable News Network, Inc., a WarnerMedia company. All rights reserved.