While this statement may please many who have been bitten or had a loved one bitten by the payday loan companies, Philadelphia did not ban these loans, the payday loan companies did.
They have decided because of the limits on interest rates put on these kinds of loans by the state of Philadelphia they are no longer profitable.
How bad are these loans?
An example of the life of a payday loan:
- Most loans last 5 months minimum
- Average APR is 700%
- Most payday loans are rolled over 4 to 5 times before being retired
- Because of the ease of online loans, many go this route, and many are illegal and collection practices are relentless
- About 1 in 3 loans end up in default, and end up costing borrowers up to 10 times the original cost
- Borrowers end up using consolidation companies to clean up the mess.
People can become very unrealistic when considering these loans. They were designed to be small dollar, short term loans that were to be retired in full on the first and only due date.
Companies soon found ways to really turn these kinds of loans into traps that put the borrowers in real hardships.
Time to fight back!
In a way it works out well for the borrowers, as these loans really are not an option to be taken out for any reason at all. They are designed for maximum profits for the lenders in a minimum amount of time, and the only one who suffers is the borrower.
The lenders practice very indiscreet collection practices that can get the borrower fired, and in my opinion the state is better off without them.
This City has managed to keep the brick and mortar companies away, but what about the online companies?
Philadelphia is going after the online lenders that are practicing illegal behavior, but they are extremely hard to track down.
Many are based out of the country, and will change locations multiple times a year. These companies will change their names to keep drawing money out of your bank accounts, and are now working with some of the major banks in the USA
The only way to stop these guys from tapping your account is by closing it, and it must have a zero balance to do that.