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[The following is a partial transcript of this episode of The Scott Alan Turner Show. Listen to the full episode to hear this story, listener questions, money hacks, and inspiring stories of people that are changing their financial lives. Subscribe to the free podcast on iTunes or Google Play]
My son walks into my office this morning and asks what I’m doing. I’m working on a story. What’s it about he asks? Um, how do I explain payday lending to a five year old.
I’m writing about stores, where people go and get money. And there are these evil villains in the store trying to take people’s soul’s and ruin their lives. And the stores don’t even have lolly pops for kids!
That was all he needed. He’s never going in that store.
People use payday loans because they need some quick cash, and have no credit or low credit. Imagine if you had no money, all your friends and family had no money or you didn’t want to borrow from them, and you needed some cash to pay rent tomorrow or you’re getting evicted. This happens, payday loans seem like the answer. Unfortunately it becomes a trap.
A borrower takes out the money, the loan is generally required to be paid back in a couple weeks. Well it’s hard to payback a loan that quick when a person didn’t have the money to begin with. Then, BOOM! The person gets hit with a fee, and the lender extends the length of the loan.
An example is a person borrows $300 and will pay it back in two weeks. They can’t. $50 fee. Now they owe $350, due in another two weeks. Two more weeks go buy and they can’t pay the loan back. Boom! Another $50 fee to extend the loan.
In four weeks they’ve gone from borrowing $300 to owing $400. Yearly, that comes out to about a 350% interest rate. Imagine a mortgage with a 350% interest rate? We’d all be living in cardboard boxes. And not the nice refrigerator boxes either. It’s a shoe box. It would barely keep your head dry.
It’s a cycle of debt people get trapped because as you know, we didn’t learn about money in school.
There are more payday lenders than there are McDonalds. And they aren’t going away because our imperial federal government just gave them a free pass to continue ripping people off. Payday lenders are loving life right now. There deceptive lending practices where they charge as much as 350% interest rates will continue on, because we have politicians – specifically we have lobbyists – that put profit ahead of people.
The Consumer Financial Protection Bureau agency’s chief, Kathy Kraninger, said in a statement that pulling back the rule would encourage competition in the payday lending industry and help improve credit options for borrowers in need.
The CFPB – is a U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.
No they don’t!
Bureau officials this week said they plan to nix the part of the rule that requires payday lenders to check borrowers’ ability to pay.
A senior CFPB official said the bureau’s decision stems from a concern that there is not enough evidence showing that payday lending is unfair and abusive enough to necessitate the rule. Also, the official, who spoke to journalists on condition of anonymity, said that if the rule had kicked in, some two-thirds of borrowers wouldn’t qualify for a payday loan.
Read: payday lenders would go out of business, and if they go out of business they don’t have money to donate to reelection campaigns so that politicians can buy votes and bribe voters with new high school band uniforms and research grants for the nighttime habits of the speckled nose chameleon.
- Education is the only way to defeat the bad guys.
- Education is how we get ahead, when, and I know you do this already, when you follow good advice.
You, as a Moneyac, are needed to educate others. It’s part of your duly sworn knighthood, as a listener of the show. By listening to this show you are smarter than 99% of people, even those yahoo’s on Wall Street, and I congratulate you for that. I wish I had heard or paid attention to this stuff as a teenager.
A fact is, outside of every military base is a payday lender, trying to rope in our troops. The military even has a special term for them, I found. They call them snakeheads or snakes.
If a person thinks – “payday lenders, those are just for poor people.” No, they target our fine servicemen and women.
In the financial industry there are many companies that are not our friends. They aim to harm more than help, and they hide their true intentions behind made up talking points like
- Hard working families
- Seniors. Seniors will lose their medication and die in the streets!
and my all time favorite – the children!
What about the children! If you don’t support this whack-a-mole thing I’m proposing that’s going to allow some lobbyist to pay to me to Vegas on a private jet, you hate children and want to cancel Sesame Street. If we don’t have payday lending people can’t buy food for their children! Children will die! What kind of person are you?
Um, smart enough to see through the lies and deception to help people achieve the financial independence they deserve without getting ripped off. And now, you are too my amazing listeners.
It’s the payday lenders that are hurting families, not the lack of insane interest rates.
Bad advice and the “profit before people” business practices that keep people trapped in the debt cycle, the broke cycle, the struggle, they will never go away.
It’s kind like the common cold. We wash our hands, stay away from sick people, take your vitamin C. But the virus is still out there. Waiting.
So what are we left with? We can talk to military people. Everyone knows someone in the military. Educate our kids. Learn to read between the lines, that’s how you avoid getting the wool pulled over your eyes in life. That’s how you keep from getting ripped off.
- It might be a payday loan for someone
- It might be an 18% interest rate on a car
- It might be an extended warranty
- It might be a time share
- It might be identity theft protection services
No matter where you live, what country, what your income, know this – the government – which does some good things, like build roads and shoot down flying saucers – but they are not always looking out for us. Which means it’s on you to take personal responsibility to learn all you can, ask questions, get second and third opinions, and exercise caution. If it sounds too good to be true, it’s too good to be true. You do those things, you’ll keep more of what you earn, you’ll retire with enough, and you can help a bunch of other people along the way do the same.
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