Is the New "Payday Loan" Lending Model Still Predatory?

The pressure on the payday loan industry resulting from heightened attention on its predatory lending methods is causing a new metamorphosis in the industry. This time, the industry has lured a bi-partisan effort in Congress to assist it.  Not much gets done in Congress these days in a bi-partisan fashion, so it is disappointing to see our lawmakers falling victim to this scam and hailing its supposed technological glory.

What's This "New Model"?

Payday lenders try to convince folks they are doing our community a favor by lending to people who would otherwise be shut out of traditional lending options. So, in a new public relations attempt over the last couple of years to recreate itself as a legitimate lending alternative for the working poor, the industry has gone full throttle on the “online payday loan.”

Oh, but that moniker is still too crass and suggestive of predatory lending for the online payday loan companies. Therefore, the industry created the term “Fintech” to describe the online lending industry.  Fintech is short for “financial technology,” but it is still just old fashioned predatory lending trying to disguise itself as some sort of technological advance.

The Truth about Online Payday Loans

Published in conjunction with The Center for Public Integrity, a non-profit investigative news organization, Salon.com recently released an extremely interesting article exposing the history and the predatory business model of the online payday loan.  In an attempt to appear more legitimate, these online payday loan lenders partner with “rent-a-banks” and Native American tribes. This way, they not only can improve their image, but also can circumvent state laws that prohibit predatory lending.

Because of the industry’s use of technology (such loans offered over the internet, and the “high tech” panache the technique seems to bestow) Congress has been “snookered” into assisting in the collection of these debts with a bi-partisan bill entitled Protecting Consumers Access to Credit Act. Even though the name of the bill seems to indicate Congress is attempting to help the American public, I encourage you to look deeper.

Gregory Meeks, a co-sponsor of the bill, is part of the “banking caucus” in Congress. In other words, Representative Meeks receives an extreme amount of money from the financial services industry, including payday lenders.  Is the bill really an effort to help the working man and woman in American today? Or, is it just another example of lobbyist paying to play in Washington, D.C.?

 

If you are considering a filing for bankruptcy relief but are concerned about what the rules require and how they may affect you, please contact one of our locations nearest you in Alabama, Mississippi or Tennessee. We offer free, confidential consultations with our licensed attorneys.