I have long ago signed up for e-bills, mainly so I don’t have to go to the mailbox just to find a pile of them in there I can’t pay. I get email late notices instead. I have direct deposit so checks will never be found there either, although I can always hope. So I get predominantly “junk mail.” The only thing that is keeping the United States Post Office from going $40 billion in the red. Most of the mail doesn’t make it past the garbage can on the side of the house, on the way back inside, but every once in a while there will be a catalog I want to look at or some official looking envelope. Like the two I got yesterday.
Both of the contents of these letters were behind yellow envelopes like the kind you get your IRS refund or your Social Security check – if it’s not direct deposited I guess. Very official looking envelope with an address, a bar-code on the bottom and the year, 2012, in the lower right corner. You’d swear it was a government check. The only thing you can see through the cellophane window is “Pay To The Order Of:” followed by your name and address on paper that looks very much like “safety paper” used to print checks which makes them harder to hide erasure. I’m not expecting any checks, but these sure look like they could be checks, and I’m not going to throw something away that could be some money that mysteriously belongs to me.
I’ve discovered that the biggest user of this type of deception is auto dealers. I’ve received several now asking me to sell my vehicle and the check – which is clearly stated at the bottom left as “Non-Transferable THIS IS NOT A CHECK – promises me an additional $2,500 on a new vehicle. I just need to bring this “check” down to the dealership and cash it. But I thought it wasn’t a check? The official-looking envelope check deception has got me again. I’m forced to open it. What if it’s a check?
The other, smaller, official-looking yellow envelope looks even more like a check. After I tear up and toss out the auto dealer “check,” (Don’t want anyone cashing that at the car dealership with my name on it.) I open the envelope with an official-looking check peering out of the cellophane window paying to my order. Inside is a check for SEVEN HUNDRED FIFTY DOLLARS AND 00/100 CENTS. It says “This Cash Amount Could Be Yours:” written over $750. And it’s stamped “YOU’RE PRE-QUALIFIED” on the lower right. The non-check is written by “PayDay1One.”
Thank the lord I wasn’t born yesterday and am pretty versed on what this is, because I could really use the money. Before I tear it up and throw it away I decide to look at the “fine print” to see how much this pre-qualified loan is going to cost me. Wait for it…”Annual Percentage Rate(APR) for an example payday loan of $750 is 359.01% with 18 bi-weekly payments of $114.75.” The reason this is an “example” is that the rate differs by state, and some states actually, thank the lord, outlaw this type of loan sharking all together. PayDay One claims to be licensed in 20 states. The APR in Arizona is 448.75%, in Louisiana 456.25%, in Idaho 586.61%. It’s on their website. They told me to check.
The term “bi-weekly” can mean every two weeks, or twice a week. They don’t make this clear. However, the loan term in New Mexico is not stated either, but the more you borrow the less the APR, down to 198.45% for $1,500. There’s a clock on the website telling you how much time you have left today to get your loan deposited to your checking account as soon as tomorrow.
For those of you that didn’t take the time to multiply the bi-weekly payments, automatically withdrawn from your checking account, the total is $2,065.50. I don’t know about you, but if I’m desperate enough to need to borrow $750, I sure as hell can’t afford to pay back $2,000 and change. Why does this sound so much like “loan sharking?”
I used to ask people all the time if they could loan me fifty bucks…But only give me twenty-five. “Then I’ll owe you twenty-five and you’ll owe me twenty-five and we’ll be even.” It never worked, and rarely got the chuckle I was expecting.
Loan sharking is the practice of lending money to desperate people at extremely, often illegal, interest rates. How can 359.01% not be an ILLEGAL usury rate? Of course, loan sharks don’t require you to have a checking account so they can automatically debit it, an email address, and an identity verification as PayDay One requires. If the loan shark doesn’t get the money back on Wednesday as agreed, Guido will come find you and break your kneecaps with a Louisville slugger. Maybe, because PayDay One puts a “Consumer Notice” on the bottom of the fake check letter stating that “Payday advances should be used for short-term financial needs only, not as a long-term financial solution. Customers with credit difficulties should seek credit counseling,” makes them legal? Who the hell are they targeting if not “customers with credit difficulties?” As far as I can tell, someone who needs $750 and is willing to pay that interest rate for it, and gives them the information they require, which allows them to debit their checking account twice a week for an amount they probably don’t have, which will create overdraft fee, after over-draft fee, and probably a fee on the other end, is pretty much the same as giving them a Louisville slugger and exposing your kneecaps.
Why are payday loans even legal? Certain state legislatures deregulated small loans, some even exempted these payday lenders from small loan or usury laws. Others went even farther and enacted legislation to authorize loans based on holding the borrower’s pay check without considering interest rates. I remember watching a television expose on these payday loan sharks in Florida. The amount of interest that was paid for these desperate loans was ridiculous. The amount owed never seemed to decrease, and it sure didn’t help the desperate people who were borrowing.
I completely side with the state of Georgia. They prohibit this type of lending based on violations of the racketeering laws. We’ve put people in prison for this.
Only seventeen states and the District of Columbia prohibit these types of loans. It’s time for the rest of us to get on the bandwagon. WTF