Payday Loan Pitfalls - KMSP-TV

FOX 5 I-Team

Payday Loan Pitfalls

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ATLANTA -

A new study reaffirms what financial experts keep saying:  Payday loans are simply a bad idea. They trap the already financially vulnerable.

In Georgia, payday loans are illegal, but people still get taken. How does that happen? Well, according to the Governor's Office of Consumer Protection, through the Internet where lenders easily cross state lines. 

So, if you're tempted, let's go to this latest study from the Consumer Financial Protection Bureau. People take out these ultra, high interest loans in credit emergencies and plan to pay them off quickly, but often they don't. 

The study says four out of five payday loans are rolled over or renewed within two weeks.  About half of these loans last more than 10 months.  The study shows that many borrowers renew the loans about seven times. This is how it adds up: Seven times means you'll pay more in fees than you originally borrowed.

That's if the lender is playing by the rules. The  Consumer Financial Protection Bureau looked at 12 million loans and finds that a troubling number of payday lenders engage in what it calls unfair or deceptive collections practices like threats or fuzzy math.  And what ends up happening is that this person already in a vulnerable financial situation ends up in a cycle of debt that's hard to climb out of.

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