Minnesota organizations call for crackdown on payday loans
Minnesota residents in a financial bind, whether it’s an emergency medical situation or an unexpected bill, can easily be lured into cash advances on paychecks, structured annuity payments or other income.
Minnesota residents in a financial bind, whether it’s an emergency medical situation or an unexpected bill, can easily be lured into cash advances on paychecks, structured annuity payments or other income. These services are no longer offered by unreliable or suspicious companies, but by banks, making them seem like a trustworthy avenue out of a stressful situation.
However, consumer advocates warn that in spite of the big-name banks offering them, these advances are no better, and no more affordable, than aggressive payday loans, which often carry hefty interest rates and may end up costing more than the initial benefit they provide.
The amount offered on short-term loans may seem negligible to some – up to around $600 in most cases – but for families trying to get by, those few hundred dollars can make or break the bank.
Pam Johnson, a researcher for the Minnesota Community Action Partnership, spoke with the Minnesota Post about the potentially disastrous consequences of using these advances.
“Our work and personal relationships with thousands of low-income Minnesotans, we know that household situation 30 days after the payday loan has not changed, and they will be unable to pay the loan on time. This often results in an ongoing cycle of debt at extremely high interest rates that pushes families into desperate situations,” she told the source by email.
As a result, more than 200 advocacy organizations across the country have called for legislative action to restrict or ban the use of these loans, particularly from national banks that add credibility to the practice.
If you are struggling financially, rather than gambling on a payday loan, consider speaking with an experienced attorney who can advise you on the ways you can get back on your feet. The cost of bankruptcy may be minimal compared with the interest on an unpaid paycheck advance.