Frugal Friday: Should We Sue PayDay Loan Lenders?
Happy Friday everyone! It’s hard to believe that we’re at the end of another week. This has not been a fun week in the Frugal Rules home as one of the little Frugal Rules shared a lovely cold with Mom and Dad which took both of us out. I hate summertime colds, but am thankful to be on the mend now.
I read an article this week on the NY Times website that struck a chord with me and thought I’d dive into it a bit. The article discusses the state of New York suing a PayDay Loan company – Western Sky Financial for violating state law by offering short term, or PayDay Loans to individuals and violating the state’s interest rate cap they impose in order to protect against usury. As an aside, Western Sky is affiliated with a native American tribe which claims it’s not subject to local state laws. I fully believe that what we have done to native Americans in the past is horrendous and that discussion is not really the purpose of this post. That said, what this PayDay Loan Lender is doing is offering loans with rates exceeding 300% in some cases and nearly 90% at a minimum. Ouch! How many branches does Western Sky Financial have in New York…zero! As a way to get around interest rate caps imposed by a number of states, Western Financial is one of many online PayDay loan companies that do what they can in order to evade state laws and offer loans with crazy interest rates to those who may be in need. In the case of Western Sky, they’re based in South Dakota, but shuttle off their applications to California for processing. In short, they’re playing a shell game in order to try and keep their noses clean. They’re not the only PayDay Loan Lenders that do this as the article stated that many of these outfits are shifting operations off shore in order to try and evade local laws.
I’ll not get into the debate of whether or not you should ever get a PayDay Loan. That said, the point is really to highlight what some will do in order to push horrible products like PayDay Loans. They play shell games, market heavily to those who might be more predisposed to being in need and make it virtually impossible to climb out of the vicious cycle it can create. Thankfully, I’ve never taken a PayDay Loan; my vice was treating credit cards like free money. However, I’ve read many stories about how terrible they can be if you ever do go down that route. With that in mind, what efforts do we as consumers need to take in order to stop giving these online PayDay Loan companies additional business? The easy answer would be to not borrow from them, though I know that’s easier said than done. While I do think that suing on a state level can be effective, in fact several states have been successful with that – there is a larger issue here and that’s good ol’ financial literacy. These companies often prey on those who have need or simply do not appreciate what the cycle of taking out a PayDay Loan will start. The best way I see to attack the lack of knowledge is through education. Education should focus on managing money wisely, watching spending and expenses and planning for the future as opposed to only living in the present. Regardless of whether this happens in the home or at school, it’s a lesson that needs to be taught sooner rather than later. This, in conjunction with legal challenges, and simply not giving business to these outfits or the banks they work with is the best way to attack the vileness that is PayDay Loans.
There were some great blog posts this week, which always makes it hard to narrow it down to my favorites. If you’ve not had the time to read some of them, then I highly recommend them. If that doesn’t suit your fancy, then maybe some free money will?! You still have a few days to win part of $900 in cash and the iPad mini/cash giveaway just started. If you’ve not signed up for either, what are you waiting for?!
Lastly, a shameless plug, if I could ask you for your vote in the 4th annual Plutus awards that would be much appreciated. You can choose any category, of course, but would greatly appreciate your vote for Best New Personal Finance Blog or Best Frugality-Focused Personal Finance Blog that would be great! 🙂
Blog Post of the Week
The Danger of Making Money Your Top Priority on Young Adult Money
I loved this post by my blogging friend DC. I think why I enjoyed it so much was because I could relate to it so well. Who doesn’t enjoy making more money? I know I do, but at what expense will you do that? As DC pointed out, more money is a means and not an end. While having that extra money is nice, there are many other things which are so much more important, such as time with those you love or enjoying hobbies. There is a fine balance to have, but at the end of the day I’ll likely choose the experiences with those around me and happiness as opposed to making more money.
Other Blog Posts That Ruled
You’re Cheap if You Decorate Rooms Frugally on Canadian Budget Binder
A Love Letter to Millennials, From the Stock Market on Economag
What’s a Working Parent to do? on Debt RoundUp
5 Essential Financial Planning Steps for Your 30s and 40s on The Chicago Financial Planner
Overcoming Obstacles: I Have No Time on One Smart Dollar
Odd Search Terms
I need to become rich…Start robbing banks!
What does a Canadian have to do when they have an accident abroad…Beats me!
How to get Rick…Start looking for him!
I love shooting off fireworks…I used to as well, but I like my vision better!
Should you buy clothes at Wal-Mart?…Not even if they’re giving them away!
Is it unhygienic to floss on the couch?…No, not at all!
What happens if you throw a large amount of money on a penny stock?…It would be more fun to watch it go down the drain and would achieve the same result!
Was the critical factors for success for your aunt and uncle to be in a situation to retire, and have so many homes and a comfortable retirement?…Huh?!
What are your thoughts? Is it good for a state to sue a PayDay Loan company and should it stop there? Do you have anything fun planned for the weekend?
Photo courtesy of: Guigo.EU