The Future of Payday Loans

Filed in archive Bootstrapper Tips , information about on January 22, 2010

© rinkjustice


Use a cash advance to pay back taxes. Or get a quick and easy payday loan to buy a big screen TV so you can watch March Madness in style. Or, well... what do you need to do?

Payday loans have become the focus of attention recently as law makers at both the state and federal level look at increased regulation for the financial industry. The U.S. Senate to wants to create a new Bureau of Financial Protection that would protect the interests of U.S. consumers.

In parts of the US payday loans are simply illegal because it violates usury laws. Thirteen states have managed to either regulate the industry out of existence or have simply made payday loans illegal.

Should payday loans be legal? You can look at the practice two ways. Those who like payday loan services say that for a "small" fee (usually about $15 on a $100 loan) the average Joe an run out and solve their cash flow problems by borrowing against their next pay check. Those who don't like the service say that some of the most vulnerable members of society become trapped in a cycle of taking out payday loans to pay their bills, and that they end up paying an annual interest rate of almost 500% on the money they borrow.

For now it looks like the industry is out of the hot seat. It looks like the Senate has decided not to include payday loans in new financial regulations.