Short answer: no.

Payday loans are not what they seem. While they may appear to be a convenient “quick fix” for a temporary financial situation, they often result in a vicious cycle that can accumulate interest at rates of up to 780%.

Most Payday lenders require borrowers to give access to their checking account. Many loans come due in just two weeks, which is hardly enough time for the typical consumer to rebuild their finances to pay off their debt.

When the loans are due, they can take up 36% of a borrower’s paycheck on average. Most people can’t afford to sacrifice such a huge portion of their paycheck and still cover expenses, especially after they were just in a financial bind! However, when the Payday lender has access to their checking account, they can pull funds whether they are there or not, also creating overdraft fees for the borrower.

Often as a “quick fix,” the borrower takes another loan for another two weeks—essentially borrowing the same amount that they borrowed the first time, plus added on fees and interest. And then another. And another. Eventually, they find themselves in a debt spiral that can last five months on average. At HFLA we have seen borrowers borrowing and re-borrowing the same payday loans for over three years! The financial and mental stress is often devastating to these individuals.

The average loan is for $375 and the average fee for unpaid debt is $55 per pay period (about two weeks) on average. At the end of the five-month cycle, the borrower has paid over $500 in financial charges for a loan that was only $375 to begin with!

Twelve million Americans use payday loans annually. That’s entirely too many consumers putting themselves at risk of getting trapped in a vicious cycle based on predatory lending practices.

If you or someone you know is considering a payday loan, talk to us instead. The Hebrew Free Loan Association is a non-denominational organization that provides interest-free loans to those in need. We refer borrowers to other nonprofits that offer free financial counseling to ensure that they maintain healthy credit scores and receive financial advice designed to help them in the future.

To join HFLA in the fight against payday loans, click here to visit our new donor platform designed to make giving easier than ever.

HFLA of NEO Board president, Lisa Arlyn Lowe recently sent the following letter to Ohio Senator Rob Portman in support of his opposition to the health care bill currently before the Ohio Senate. 

Dear Senator Portman:

Thank you for opposing the health care bill that is currently before the Senate.  In its present form, the Senate Bill is detrimental to all Americans—not just your Ohio constituents. In addition to slashing Medicaid and Medicare, as well as denying millions of Americans access to affordable health care, it limits (or prevents) access to care for opioid addiction – an issue about which I know you are personally passionate.

If this or similar legislation is passed into law, among the “unintended negative consequences” of significantly increasing the cost of health insurance (if it is available at all) will be an increase in lower or low income families who turn to predatory “payday” loans to finance their medical needs – even the basic ones.

In Ohio, payday loans are, by far the nation’s costliest—with a typical (yes, a typical) interest rate of 591 percent – your constituents will be doubly disadvantaged.  In addition to the burden of paying out-of-pocket for medical treatment, many Ohioans will – if they are fortunate enough to get timely treatment and recover – be burdened with decades of usurious debt.

I currently have the privilege of serving as Chair of the Board of Directors of HFLA of Northeast Ohio, which has been providing interest-free loans to Northeast Ohioans, on a non-sectarian basis, for over 113 years.   In recent years we have helped an increasing number of families to pay off predatory loans, “right size” their budgets and pull out of debt.  Last week we helped a gentleman who went to a payday lender because the medical equipment his diabetic wife needed was not covered by insurance.

From our unique perspective, it is clear that if the Affordable Care Act is repealed and millions of people cannot afford health care more than in any other state, the payday lenders will be among the few true winners.

We urge you to continue opposing any change to the ACA that would have this devastating result for the people of Ohio.

HFLA of Northeast Ohio

As a consumer, you have the right to be heard. The power of thousands of consumer complaints can make a huge impact on the fight against the vicious cycle of payday loans.

Payday loans are small, one-time loans aimed toward consumers who find themselves in need of a temporary financial fix. They are a form of predatory lending due to their short payback periods and extremely high interest rates.

Consumers who take out payday loans often find themselves trapped in a cycle of debt that lasts for months and results in accumulated interest rates as high as 780%. That small loan suddenly becomes a huge debt and can be very bad news for a consumer’s credit and financial situation.

But it doesn’t have to be this way! Together we can end the suffering caused by predatory lending. There are organizations and tools in place designed to give the consumer a voice and minimize the power of these lending agents.

The Consumer Financial Protection Bureau (CFPB) is, in the organization’s own words, “a 21^st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”

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