Newspaper Page Text
Paying the high costs of payday loans
%PHAEL TRICE EDNEY
A Correspondent
WASHINGTON
(NNPA) — On the surface,
Sandra Harris appears to
have it all together.
She’s the financial assistant
to the director of finance at
the University of North Car
olina at Wilmington, her
alma mater. Last year, she was
named state employee of the
year. In addition to her uni
versity job, she is an on-air
personality for WMNX 97.3
FM. '
But while Sandra Harris
seems to have it all together,
she is in deep financial trou
ble, often turning to high
interest payroll loans to make
it from week to week.
“There are some times that
I've been at the radio station
and, this is no lie. I've been
working on air and I am
blubbering off the air. And
when it’s time for me to talk,
I just do my... This is your
girl, Sandra. Right now out
side, - it's .da, da, da
da...Then turn the mic off
and I go back to crying
Nobody knows I'm crying.”
: Harris is crying and crying
out for help. And she is not
alone. Thousands of people
are also caught in a web of
payday loans, according to a
study conducted last year by
the Durham, N.C.-based
Center for Responsible Lend
ing, a non-profit think tank.
“Borrowers who find
themselves involved with the
industry very often find
themselves caught in what we
call the debt trap of payday
lending,” says Keith Ernest, a
researcher at the center, who
co-authored the study.
“When we looked, borrow
ers, on average, received eight
to 13 payday loans per year.
We've talked to borrowers
who have paid thousands of
dollars in fees. We conserva
Black colleges
%et $1 million
or smoking
cessation research
GREENSBORO, N.C.
(AP) — Three historically
black colleges will use a
$1 million grant for
'smoking cessation pro
grams on their campuses
‘and to research cigarette
‘marketing in low-income
‘areas.
~ Bennett College, N.C.
‘A&T State University
and N.C. Central Uni
versity got the money
from the American Lega
cy Foundation, which
‘was formed as part of the
(1998 settlement between
state attorney generals
‘and major U.S. tobacco
companies.
* The foundation has
given money to graduate
level research programs at
lbther U.S. universities,
but this is the first grant
for anti-smoking pro
grams on college campus
es.
. “It’s time for African
jAmericans to take a seri
ous look at the toll tobac
co is taking on our fami
tively estimate that predatory
payday lending fees, those
extracted from borrowers
caught in a debt trap of
repeated transactions, cost U.
S. families $3.4 billion annu
ally.”
The payday loan industry
defends its practices, saying
the loans are promoted as
being for emergencies and
urgent cash needs.
But several consumer and
civil rights organizations,
including the NAACP are
taking on the industry, saying
it takes unfair advantage of
the most vulnerable segments
of society. :
“Research has shown — and
a drive through any low
income neighborhood clearly
indicates — people of color are
a target market for legalized
extortion,” says NAACP
Chairman Julian Bond.
“This so-called business can
not stand. It must be banned.
The NAACP is dedicated to
eliminating payday, because
wealth building and saving
for the future are vital to the
economic success of commu
nities of color.”
This is how the loan gener
ally works: There is a 15 per
cent fee on a loan amount.
Thus, a borrower writes a
check for S3OO and receives
$255 in cash. And the other
$45 represents the fee. There
fore, they pay $45 for $255
in credit, usually for two
weeks.
The borrowing — at annual
percentage rates of 400 per
cent — does not require a
credit check. Usually, all a
person needs is a checking
account, a post-dated check
and a check stub to show
they are employed.
“What the borrower does
not anticipate is not being
able to pay it back,” says
Michael A. Stegman, chair
man of the Department of
Public Policy and director of
lies, our loved ones and
on our communities,”
state Rep. Alma Adams,
D-Greensboro, said in a
ceremony at Bennett
College. “We cannot con
tinue to ignore or push
this issue of tobacco con
sumption off the agen
da.”
Blacks are somewhat
less likely to smoke than
whites, but suffer higher
rates of smoking-related
diseases.
Bennett will train stu
dents to help their fellow
students quit smoking.
A&T students will make
radio ads about the
health risks of tobacco.
Bennett and A&T stu
dents will work together
to track retail sales and
marketing of tobacco
products in low-income
neighborhoods. N.C.
Central will compile
tobacco prevention and
cessation materials and
distribute it to other his
torically black colleges.
AUGUSTA FOCUS
the Center for Community
Capitalism in the Kenan
Institute of Private Enterprise
at the University of North
Carolina. The institute stud
ies problems between busi
nesses and communities.
Stegman also conducted a
study of payday lending prac
tices last year.
“Whereas virtually no pay
day loan outlets existed 10
years ago, industry analysts
estimate there are now up to
14,000 of them, with total
loan originations of between
$8 billon and sl4 billion in
2000 alone,” Stegman’s study
states. “At an average of S3OO
per loan, this translates to
between 26 million and 47
million individual payday
loan originations in 2000.
Experts anticipate that a
steady growth in loan
demand to about S2O billion
a year by 2004 will fuel
expansion at a rate of about
100 new payday loan outlets
a month across the country.”
There are plenty already.
According to Stegman, Mis
souri has 800 such outlets;
Florida and Chicago have
500 each; Washington state
has more than 400; and with
approximately 2,000 outlets,
California probably has more
payday loan offices than
McDonalds or Burger King
fast food outlets. Rep. Bobby
Rush (D-Ill.) introduced a
bill last June to protect con
sumers from payday lenders.
H. R. 2407 calls for Con
gress to amend the Con
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sumer Credit Protection Act
and other banking laws to
protect consumers against
exorbitant fees, perpetual
debt and other adverse prac
tices by payday lenders. The
bill has languished in the
Subcommittee on Financial
Institutions and Consumer
Credit under the House
Committee on Financial Ser
vices. Twenty states have laws
or are considering laws regu
lating payday loan agencies.
Thats not nearly enough,
says Keith Corbett, a vice
president of the Center for
Responsible lending. He
tracks legislation and assists
with lobbying efforts against
payday agencies.
“I fight them across the
country,” Corbett says.
“What they do is they target
a lot of the African-American
legislators and they've got
some pretty smart black folks
working for them.”
Harris recalls that she first
heard of the easy payday as a
radio commercial shortly
after her husband, Julian, lost
his job as an executive chef
three years ago.
She started by borrowing
S3OO to help make ends
meet. She borrowed more
and more from various pay
day lending agencies, desper
ate to cover the costs of each
loan and to pay each one
back. In fees alone, Harris
estimates she has paid about
SB,OOO on loans of $4,000 to
$5,000 over the past three
years.
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Meanwhile, the couple was
forced to leave their spacious
two-bedroom apartment of
eight years last year and were
exploring homeless shelters
when they found a low-rent
apartment through a friend.
He’s gotten a new job, but
the pressure s still on.
“It’s like a ton of bricks. I've
really felt like I was choking
or can't breathe,” she says.
“I've felt like there was no
help.”
Actually, Harris is the
exception to the typical pay
day borrower. They are usual
ly single, black women
between 18 and 59, frequent
ly with children, according to
information published on
PaydayandPaycheckloans.co
m, a Website for people
interested in starting their
own payday loan business.
Men are also easy targets.
“I was robbing Peter to pay
Paul to pay Mary to pay
Jane,” says Sidney Hughes, a
security officer in College
Park, Ga. and custodial
father of two middle school
children. He ended up bor
rowing $3,000 from payday
lenders, starting with a S4OO
loan between paychecks. He
has paid back more than
SIO,OOO in fees over nearly
three years.
Finally back on his feet
after help from a lawyer,
Hughes says, “They won'
leave me alone.”
He still gets frequent emails
offering cash deposits into his
bank account. “I get tempted
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all the time,” he says. “But,
no. No.” Harris, who has also
obtained a lawyer, agrees. At
the time, it seems like the
way out,” she says. “But this
is not a quick fix... This is no
answer.”
“Gall me
| Cm— S—
today”
[ TR,
Vanessa Jones
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