Over time, controversy and skepticism regarding payday cash loans has escalated significantly, particularly in recent years as the United States has faced one of the worst economic declines in history. Many people direct this skepticism toward the distributors of cash advance payday loans, believing that these lenders take advantage of the consumer by overcharging them in interest and processing fees.
What consumers do not realize, however, is that these days, cash advance loan lenders are more apt to lose money on these transactions, since recently passed state laws have capped interest rates at under 40%. This makes the average $15 fee on a $100 cash advance illegal in many states (as that would translate to an interest rate far beyond 40%), even though that particular fee was only garnering the lender approximately $2 in profit to begin with.
While it is impossible to defend every lender in America, as every business has its share of ethically questionable employees, overall the lenders are simply doing their job: providing cash quickly for those who need it. In other words, rather than focusing on a payday loan cash advance as a “scam,” one should instead consider the fact this easily obtainable loan helps hundreds of hardworking and upstanding citizens from different walks of life and across a wide range of situations, and has in fact become an even more essential service in the harsh economy we are facing today.
It is not uncommon, for example, to hear a story about an average low-to-middle class family with little to no savings, whose primary wage earner has lost his or her job and is left with no way to cover the next month’s bills. A payday cash loan can help this kind of family. Or, perhaps, a wealthier individual might have unexpectedly been laid off, finding himself forced to max out credit cards to meet his expenses-thus lowering his credit score and preventing him from receiving any loan besides a payday cash loan.
Furthermore, it is important to note that individual lenders do not operate without oversight. The Consumer Financial Services Association of America is a nationwide organization that monitors cash advance transactions in nearly half of the lending institutions in America. Essentially, the CFSA’s job is to protect the consumer from irresponsible lending practices by ensuring that the lenders follow appropriate and considerate protocol when seeking payment on these loans, and also by providing the proper channels for the filing of grievances or complaints, should consumers feel they were mistreated.
It is also essential for consumers considering a payday loan cash advance to educate themselves about the process. For instance, it is advisable for loan recipients to get all terms of your loan presented to them in writing (and to ask for a personal copy of these terms). And if someone changes his or her mind about the loan, they should know that they also have the right to retract the loan acceptance within a day of signing the papers. All loans come with risks-it is just make important to be aware of the details and consequences before requesting a payday cash loan.