Payday Lending

Tuesday of this week, the Council of the District of Columbia voted to bring Washington DC payday lenders back under the 24% annual interest rate cap. 24% is a far cry from the 350% to 550% that consumers had been charged since an exemption granted to DC payday lenders in 1998 allowed them to ignore the usury cap. Reading the comments of the council members was rather telling: “It’s like an alien species let loose in our midst.” “They steal money; they steal futures with their practices.”

Payday lending is the practice of using a post-dated check or electronic account information as collateral for a short-term loan. The industry sells themselves as a “short term financial solution” … the research, however, suggests that the payday lending business model is designed to keep borrowers in debt, not to provide one-time assistance during a time of financial need.

Consider the following:

* 91% of payday loans are made to borrowers who use 5+ payday loans/year.
* 99% of payday loans go to repeat borrowers.
* The average payday borrower pays $800 to borrow $325.
* Average APR charged nationally – 680%.

These numbers support those found in Washington DC where the 60,000 residents using payday loans last year had over 700,000 transactions (an average of nearly 12 per borrower per year). That sounds more like a long-term problem than a short-term solution …

Congress recently passed legislation capping annual rates of 36% for loans to military families. While this is set to take effect on October 1st, there are many consumer advocates that are worried that predatory products will still be sold because of the narrow definitions that are established in the law. It is estimated that over ¼ of military households have been caught up in payday lending (NY Times). In many college towns, students are a primary target – be careful!
(Source – Center for Responsible Lending).

ADDITIONAL RESOURCES.

* Alternatives to Payday Loans
* Consumer Federation of America Resources
* Get Help
* Inside the Payday Lending Industry (video)
* What is the cost of a Payday Loan (calculator)
* What are your States Regulations

Purchasing a Textbook?

If you haven’t had to shop for a college textbook for yourself or your college student recently, consider yourself lucky! The costs can be enormous [that’s not even delving into the issue of what you get back at the end of the semester during sell-back]. Do I have a choice??

Aside from attempting to check textbooks out from the library, I’ve met students that don’t buy books because they view the cost as greater than the benefit. I don’t know that I’d go that far in advocating saving money. I do know, however, that more and more online outlets are selling college textbooks (both new and used), often for significantly less. While I don’t make personal recommendations/ endorsements, I think it is definitely worth the look to understand what alternatives are available to you.

Buy it Used.
A1Books
AbeBooks.com
Alibris
AllBookstores.com
Amazon.com
Biblio.com
Bigwords.com
Bookbyte.com
BookFinder.com
Campus Book Swap
CheapestBookPrice.com
CollegeBooksDirect.com
eCampus.com
Textbook411
TextbookX.com
Valore Books

Swap it.
I’ve also read of students that have used resources like Facebook, Craigslist, and MySpace to swap books with other students, sell books the bookstore won’t buy back, and find used book groups to chat with students to get personal insights. Websites like CollegeSwapShop focus specifically on linking students up that would like to swap books. Buying college textbooks will always be an expensive proposition, but perhaps there are options available to you that could lighten the pinch on your wallet a little.