By Randy Tucker,

Staff Writer

Updated 9:52 AM Tuesday, November 8, 2011

DAYTON Banks in Ohio have been filling the gap left by payday loan shops, which were nearly driven out of the state in 2008 when lawmakers capped the interest rates they charged.

Several big banks with offices in the Dayton area now offer their own short-term loans against customers paychecks, generally in the form of checking account advances.

The banks say their deposit-?based loans are safer than so-called predatory loans from payday lenders because they require borrowers to have a history as a bank customer, which allows the banks to better assess their customers ability to repay.

But critics note that both types of loans carry triple-digit annualized interest rates and typically?require repayment when the borrower receives his or her next paycheck.

These terms have trapped some local residents in a cycle of repeat borrowing.

My husband and I have gotten caught in that vicious cycle more than once, said Tracy McCarroll, a management assistant at the Dayton-based engineering and technical services firm MacAulay-Brown Inc. On more than one occasion, we have had a family emergency, vehicle repairs, extended leave due to illness, which caused us to fall behind on our monthly bills and used short-term loans to try and help us catch back up.

The problem is that when you are already living paycheck to paycheck, its difficult, if not impossible to find the extra income to pay the loan back, forcing you to re-borrow over and over again, McCarroll added.

Banks that offer short-term, deposit-based loans including Cincinnati-based Fifth Third Bank and US Bank readily acknowledge the high interest rates and potential drawbacks. Bank officials say while the loans arent for everyone, they beat the alternatives, such as tax refund anticipation loans or loans from pawn shops.

Fifth Third, which began offering short-term loans in 2008, clearly defines the terms of the loans so their customers are well aware of what theyre getting into, said Lea Ann Stevenson, a Dayton-area spokeswoman.

Fifth Third charges a dollar for every $10 borrowed or the equivalent of a 120 percent annualized interest rate on a one-month loan, Stevenson said.

Thats similar to the terms of most other banks in the area that offer short-term loans.

We try to make it very clear that this is an expensive form of credit and should only be used in situations where you need those funds quickly and you do not have access to less expensive terms and forms of credit, Stevenson said. If this becomes an habitual thing, we would want to sit down with customers and talk to them about what would be other forms of less expensive credit.

She said Fifth Third operates in a much different manner than true payday lenders, which make loans to anyone with a job and a bank account.

One big difference, Stevenson said, is that unlike most payday lenders, Fifth Third sets limits on the amount their customers can borrow against their next deposit. Fifth Third customers can borrow up to $1,000 or no more than half of the total of their next deposit, based on a three-month average of those deposits, she said.

We certainly limit the number of times that people can do this, and we limit the amount that they can take. And that is tied to the fact that they have a direct deposit coming in on a regular basis, she said.

But Fifth Third, like many of its peers, also automatically deducts payments from the borrowers next deposit, even though the loan agreement allows up to 35 days for repayment.

That runs counter to Federal Deposit Insurance Corporation guidelines that encourage banks to offer affordable, small-dollar credit products on terms longer than just a few pay cycles to give consumers time to repay.

The automatic deductions can also boost the annualized interest rate above 300 percent, if the loan is reclaimed in a typical two-week pay period, said Kathleen Day, a spokeswoman for the Center for Responsible Lending, a Washington, DC-based consumer advocacy group.

Those are the same kinds of interest rates that led to the government restrictions on payday lenders in the first place, Day said. The banks are just exploiting a loophole, and regulators are letting them do it.

When they (regulators) capped interest rates on military personnel, they said they were trying to protect service members and their families from predatory financial problems, Day added. If its not good for the military, why is it good for everybody else?

Day was referring to legislation passed by Congress in 2006, capping interest rates on payday loans made to US military members and their families at 36 percent. Two years later, the Ohio legislature capped interest rates on all payday loans at 28 percent restrictions that drove lenders to less restrictive markets.

Short-term bank loans are now under review by the Senate Banking Committee.

Not all banks offer the loans, but the sour economy has created a huge potential market.

A survey published earlier this year by the National Bureau of Economic Research found that nearly half of all US households are financially fragile and would be unable to raise $2,000 in 30 days to meet a financial emergency.

Even with the high interest rates, a short-term bank loan is often a much more attractive option than bouncing a check and absorbing bounced-check fees from retailers and banks, said James Thurston, a spokesman for the Ohio Bankers League.

Common sense tells you that as the economy deteriorates, there is going to be more demand for these kinds of products, he said.

Its obviously better to seek this kind of financing from a bank than a less reputable source.

Contact this reporter at (937) 225-2437 or rtucker@DaytonDaily?News.com.

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USAPaydayForever.com Announces New Tips on Using Payday Loans Online
USAPaydayForever.coms website, in an effort to be more transparent, has announced new tips on the usage of payday loans online. They see a need for payday loan companies to be more open with their customers.

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More people than ever before are finding themselves looking for instant payday loans to tide themselves over for a few weeks.

With increases in the cost of living many people find that their wages are only just covering their day to day spending and an unexpected expense, for example replacing a broken down appliance, could push many families over the edge.

For these sorts of occasions, some families find that taking out instant payday loans can be the best solution for their requirements as it allows them to borrow a small amount of money until the next payday, when the debt should then be cleared in full.

As a payday loan is short term borrowing, you will find that the APR you pay could be considerably more than a traditional loan offers. This is because the loan is meant to be paid back quickly, rather than over a long term period like other types of loans but if you do miss a payment, the charges can very quickly mount up. This makes it vital that you don’t borrow more than you will be able to pay back and consider other options if you’re looking for a longer term borrowing solution.

There are many payday loan companies so be sure that you compare and contrast the different rates to be sure you’re not paying more than you have to in interest. Anyone who is thinking of taking out one of these forms of loans should consider all their options carefully and get financial advice before borrowing any money. More information on payday loans and the APR charged is available on instantpaydayloans.co.uk and you can also find an easy to use comparison tool so you can see the rates offered by 32 different companies by just filling in a single form.

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Zestcash, a startup thats trying to disrupt the payday loans market by using novel search and data analysis techniques, is about to expand into more US states.

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But the National Consumer Law Center says not all credit unions operate in the same manner. They single out 24 credit unions, out of roughly 7,000 nationwide,that provide loans that can lead borrowers into a destructive cycle of debt.

In California, Kinecta Federal Credit Union acquired Nix Check Cashing, one of the largest payday lenders in the Los Angeles area, four years ago. To get around the interest rate cap imposed by federal regulators, consumer advocates say Kinecta is gouging consumers with inflated application fees.

Randy Dotemoto, president of Kinecta Alternative Financial Solutions, said short-term loans provide an important service to its members.

While our goal is to transition consumers away from short-term credit and alternative financial services, the reality is theres a tremendous need for immediate cash solutions in the communities we serve that must be addressed,he said in a statement. For a multitude of reasons, many people choose to get a payday loan; right or wrong, consumers are accessing emergency cash loans every day to cover an urgent cash need.

Credit unions often are more consumer-friendly, said Lauren Saunders, managing attorney of the National Consumer Law Centers Washington, DC office. That said, whenever you move your money, you ought to look closely at where youre moving it to.

David Small, a spokesman for the National Credit Union Administration, the federal agency that regulates most credit unions, said he did not want to comment on a specific credit unions lending practices, but said in an e-mail statement:Each of these products represents market-driven, practical attempts at providing consumer-friendly credit alternatives for unbanked and underbanked communities. NCUA believes that the ability to offer small loans helps FCUs (federal credit unions) fulfill their statutory mission to promote savings and meet the credit needs of consumers, particularly those of modest means.

Of the 24 credit unions that the National Consumer Law Center says are engaged in payday lending, most use third-party vendors, known as credit union service organizations, rather than directly offering the loans. The National Credit Union Administration is the only federal financial institution regulator that does not have authority over third-party vendors. The agency is proposing strengthening its authority, but it has met strong criticism from industry groups, such as the Credit Union National Association [PDF].

A decision on the proposal likely would not come until after the first of the year.

CUSOs (credit union service organizations) let you do things that a credit union cannot do,said Ed Mierzwinski, consumer program director for the US Public Interest Research Group. So, by definition, I just dont like it. Credit union management should be serving the will of the members to have an alternative financial system to a stockholder-owned banking system, not an alternative financial system that is designed to extract wealth from its customers, which is what a payday lending operation is designed to do.

In addition to the concerns about credit unions offering payday loans, consumer advocates also warn against signing up with a credit union that is not federally insured. California is one of only a handful of states that does not require credit unions to have federal insurance.

If the credit union fails, deposits are not guaranteed by the federal government. Of the roughly 450 credit unions in California, there are 13 credit unions that are backed solely by the private insurance company American Share Insurance. A list of credit unions in California without federal insurance is below.

I would stay away from any credit union that is not federally insured, Mierzwinski said.

American Share Insurance did not respond to a request for comment in time for publication.

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PressMediaWire.com (Press Release Distribution) – Nov 07,2011 – Developed and reliable payday loan company offers now emergency loans with no credit check for consumers in need of fast financial assistance. People with bad credit score are welcomed as the direct lenders participating in the wide network of the company dont check personal credit history while making the decision on application. Thus, consumers looking for the fast and convenient way of obtaining some cash advance for emergency reasons should consider instant payday loans performed online. There is a website belonging to the company, therefore, the application procedure can be fulfilled totally through the Internet.

Essentially, payday loans are short-term cash advance provided usually to consumers until the next paycheck. Mostly, this form of lending is useful in urgent situations requiring additional money. These no credit check loans belong to the category of unsecured loans meaning that they can be utilized for emergency purposes.

Prior to the creation of online lending service people had to look for the local payday loan store in order to borrow some cash. Now there is no sense to leave home in order to get professional financial assistance. Today it is much easier to get financed on the Internet through the website of payday loan company. The application procedure is held on the site meaning that consumers are to fill out the form and submit it for review. The direct lenders of emergency payday loans receive the completed applications instantly and make decisions on loan requests within just a few minutes.

The beneficial factor of payday loan online is that this option is flexible and the borrower can have some time to relax because the process is discrete. Mostly overnight payday loans are given to consumers to assist them in maintaining their daily expenses on bills or utilities. In addition, some people apply to payday loan lenders to manage the withdrawing checks which are sometimes greater than the fees associated with online loans.

In addition to refused credit checks, payday lending company dont require faxing either. This means that consumers willing to borrow some extra cash dont have to send the personal documents and papers by fax. Such simplicity saves time and makes the procedure of applying fast and easy. Besides, owing to the speedy online processes, transactions can be managed quickly, thus, borrowers get access to the requested funds the same day receiving the money directly into their bank account.
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West Midlands, UK — (SBWIRE) — 11/08/2011 — Looking at a pile of bills that are due and realizing there is not enough money in the bank to cover them is an extremely stressful experience.

Unfortunately, with the current shaky state of the economy, this scenario is also quite common.

For the millions of people who are living paycheck to paycheck, the slightest added expense can throw off the ability to pay everything on time. All it takes is a medical emergency, car repair or trip to the veterinarian with a pet to make money extremely tight. With the holiday season on the horizon, more people than ever will need help making it to the next payday.

Many people who are in need of a short term loan turn to payday loan companies for help. These firms allow consumers to take out a cash advance that is usually paid back when the next pay check arrives.

A website has received a lot of attention lately for its ease of use and comparison of all payday loan providers. PaydayLoans.co.uk is an independent service that helps connect consumers with the payday loan lenders that are best-suited for them.

In addition to information about the various payday loan companies, the website also features educational and helpful articles about payday loans, including basic information as well as the pros and cons of using this type of cash advance.

“Payday loans enable you to receive a cash advance without resorting to long-term loans, or in other words – long-term debt,” an article on the company’s website explained.

“Taking out a payday loan has no impact on your credit rating and you have the luxury of being able to discuss the terms of your finance situation with a bank/lender.”

Disadvantages of payday loans, the article noted, include that they are not suitable for long-term lending due to their high rate of interest. A payday loan is really only cost effective if used over a short-term monthly period.

But for cash-strapped, stressed people who need between £80 to £800 and sometimes even up to £1,000 to tide them over for a couple of weeks or so, payday loans can really help.

Using PaydayLoans.co.uk is easy; customers need only fill out a simple application right on the homepage. In most cases, applicants will receive an instant decision. At this point, consumers may compare payday loans and decide which option will be best for them.

About PaydayLoans.co.uk:
PaydayLoans.co.uk is the leading online resource for all payday loan providers. We are an independent service who allow connect consumers with the most appropriate payday loan lenders. A simple one stop application form gives those looking a payday loans the best chance of getting one. For more information, please visit http://www.paydayloans.co.uk

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London (PRWEB UK) 3 November 2011

Motivated by research that shows that the period between early November and Christmas is one of the ‘riskiest’ of the year for both potential accidents and emergencies that often strike causing huge unexpected expense, Lending Streams new system means that people who fall victim to cash emergencies know that there is instant help at hand.

With the change of season, risks range from icy surfaces that can cause road accidents and pavement falls, as well the associated risks of an increased number of people driving to and from work in darkness. The change of temperature also causes people to switch the central heating on for the first time, often to discover their boiler is faulty, and with the bill for a replacement sometimes being up to 3,500, this throws many families finances into turmoil.

Evidence also shows that the period, which includes Bonfire Night and then holiday season parties is also prime for accidental falls, and hospital admissions are expected soar with boozy revellers in the run up to Christmas.

Lending Stream’s new 365 24/7 system is thanks to improvements in its sophisticated technology combined with boosting the number of back-office staff. The application and payment process is now designed to be the easiest, safest application process available.

Unlike some payday loan companies, Lending Stream supports multiple methods of payment, with a unique system that allows them to make secure payments. Lending Stream stands ahead of competing sites by offering instant cash service all year round, including holidays.

You can apply for Lending Stream’s short-term loans at http://www.lendingstream.co.uk and have money safely and securely transferred into your bank account within minutes. Lending Stream’s average short- term loan amount is 200. However, short-term loans can be offered at amounts between 50 and 1000.

The company sets itself apart from conventional payday loan companies by offering much longer periods in which to pay back loans of up to 1000, making the whole loan experience less stressful and more manageable since the repayments are made in much smaller easy instalments.

A short-term loan provided by Lending Stream, unlike other payday loans, can be paid back anytime over a period of six months. These short term instalment loans allow the borrower more time to pay back the loan comfortably without upsetting their monthly budget. Lending Stream customers often repay early and are able to save on interest charges as a result.

About Lending Stream

Lending Stream is an online lender formed with a single mission: to make payday lending more straightforward and understandable for consumers. We offer emergency cash loans with the additional benefits of convenience, quick approval, world-class customer service and a genuine understanding of how important an emergency loan may be to you. No faxes. No stringent loan requirements. And no frustratingly long waiting times. Lending Stream is registered with the Information Commissioners Office (Data Protection No: Z1451218) and hold a Consumer Credit License (0620194). We are registered in England (No. 6648787).

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A former Google executive has moved from the world of Internet searches to the world of high-interest, short-term lending. He says his operation, ZestCash.com, offers an innovative way to help the poorest borrowers avoid financial emergencies. But is this just a slick veneer putting a shine on the classic payday lending business?

One-time Google Chief Information Officer Douglas Merrill founded online-only lender ZestCash, which uses some fairly high-level Google-esque algorithms to assess its borrowers creditworthiness. And the site certainly looks better than your typical payday lender. Those sketchy outfits usually operate out of rundown storefronts in lower-income neighborhoods, offering quick cash infusions at jacked-up interest rates to people with nowhere else to turn.

But friendly looking ZestCash does essentially the same thing: Its loans ring up at triple-digit interest rates. For example, a three-month $800 loan will cost nearly $550 in interest and fees at the 412% interest rate that ZestCash charges.

The site is one of a number of new businesses popping up to cater to a growing segment of Americans: The poor and credit-challenged who dont — or cant — use a bank. As high unemployment and falling wages continue to push more Americans into poverty, financial innovators like Merrill are on the lookout for new ways to milk profits out of this demographic.

Firmly on the Loan Shark End of the Spectrum

Merrill says that his new model for assessing a borrowers creditworthiness and setting installment payments means he can offer lower rates than standard payday operators. But when one is talking in either case about interest rates of more than 400%, the degree of difference is arguably meaningless. The Center for Responsible Lending, a national policy advisory nonprofit for lending issues, defines any operation charging more than 36% interest — a rate cap that 17 states have put in place — as a loan shark, regardless of the secret formula it uses to underwrite its high-risk loans.

ZestCash says its rates are up to 50% lower than other payday lenders — but some of that nuance is hard to calculate, and depends the ability of the borrower to repay the loan on its due date. If you cant make the weekly $101 payment, add a $35 ZestCast late fee to your balance. If the payment bounces, thats $35 plus a possible overdraft fee of up to $35 from your bank. And if you cant pay $101 this week, what are the chances youll be able to afford $237 next week?

This is hardly better than online quick-cash lender, Checkngo.com, which offers a 14-day payday loan for $800 in the state of Utah, with a $200 fee, for a total of $1,000 due after two weeks. But if you cant repay the money then and have to roll over the loan, an annual interest rate of more than 650% kicks in. Multiply that by six payday periods — or the equivalent of three months (and there is no maximum term length in Utah) — and that $800 could cost at least $1,789.63 on the principal alone, not including interest on the $200 fee or other rollover fees. Checkngo.com did not respond to a call for comment.

Currently ZestCash is available to residents in Missouri, Utah, Idaho and South Dakota, which do not have maximum interest rates for payday loans. Four more states will be added to the roster soon, the company said.

Your Profile Includes Everything They Can Glean (and Thats Plenty)

Using a formula similar to the one Google uses to rate the quality of a website, ZestCash determines a borrowers credit worthiness based on thousands of factors from cell phone behavior to an in-person interview to your Internet trail. (Almost everyone has one, Merrill says.) They dont use a more traditional credit scoring mechanism, like a FICO score, because it is too narrow — and if youre getting a quick loan, chances are your credit score doesnt really mean much.

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The economic downturn and banking system overhaul have led to a boom in so-called payday loans, short-term, high-interest loans that help tide borrowers over between paychecks. As reported recently by the Wall Street Journal, shares in companies that provide these services have jumped in recent weeks as even more consumers have been turned away from traditional lending sources.

Financial services like these are the focus of an upcoming symposium on Nov. 10-11 at Washington and Lee School of Law in Lexington, Va. In addition to payday loans, participants will examine auto title loans, for-profit college loans, and refund anticipation loans. Legal scholars, economists  and lending company representatives will also explore emerging regulatory efforts, as both states and the federal government are poised to intervene in the fringe credit market to protect consumers from what some see as a predatory business practices.

The symposium, titled Regulation in the Fringe Economy, will take place in the Millhiser Moot Court Room, Sydney Lewis Hall. A full schedule and registration information is available at law.wlu.edu/fringe. The symposium is free and open to the public. Virginia CLE credit is available.

Margaret Howard, a Washington and Lee law professor and bankruptcy expert who will moderate one of the symposium panels, notes that loans of any kind are hard to get right now from a bank.

If you want a short-term loan, theres no easy way to get one from a regular bank, says Howard. So there is a market for these loans, and if there were no market, these businesses would dry up of their own accord. But it is an extremely expensive way to borrow money. Ten dollars a week doesnt sound like much, but when you add the percentage rate up over a year, it can be staggering.

Participants in the symposium will also look at the growth in private loans for education, especially for-profit colleges. A recent report from the US Department of Educations National Center for Education Statistics showed that between 2004 and 2008, private loans directed at for-profit colleges grew nearly 30% and private loans for private nonprofit colleges increased 14%. The report noted also that fewer than half of those who utilized private loans had borrowed the maximum from federal loan programs, which offer better rates than private lenders.

There is a question here about whether consumers who use these devices have all the information they need to make the best choice, adds Howard. Weve seen this in the mortgage industry, where people who could have qualified for a traditional mortgage were pressed into high-risk mortgages because agents would get better commissions.

States across the country are responding to consumers use of these products, but in very different ways. Some states have banned these businesses altogether while others have embraced them with little or no regulations.  The federal government is also responding, poised to intervene into fringe credit markets for the first time through the newly created Consumer Financial Protection Bureau.

The symposium is sponsored by the Washington and Lee Law Review, the Frances Lewis Law Center, Consumer Credit Research Foundation, The Washington and Lee Class of 1963 Scholar-in-Residence Fund, and the National Conference of Bankruptcy Judges.*

For more information, visit the symposium website (law.wlu.edu/fringe) or contact Mallory Sullivan at sullivan.ma@law.wlu.edu.

*In partially funding the project, the Endowment does not endorse or express any opinion about the approach used by the project, or any conclusions, opinions, or report of any research results expressed in or disseminated by the project.

News Contact:
Peter Jetton
School of Law Director of Communications
pjetton@wlu.edu
(540) 458-8782

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