KASL WESTON COUNTY EXTENSION REPORT BILL TAYLOR 4/10/12 SWIMMING WITH THE SHARKS

Predatory lenders use high pressure tactics to get borrowers to pay enormous fees, penalties and interest. They often target borrowers who have the least and need the most, i.e. college students, the elderly, low-income families, individuals with bad or non-existent credit, minorities, and military personnel. Predatory lenders may be a payday lender, a car title loan company, a rent-to-own store, a pawn shop, a tax refund anticipation loan servicer, or many others.

Payday Lenders A borrower writes a post-dated check for the total of their upcoming paycheck amount, for example, $300. The borrower receives this amount MINUS the payday lenders fee of, say, $50. It is often the case that the borrower cant pay back the loan in two weeks so instead they flip or extend the loan for another two weeks for an additional $50 fee. If the borrower were to flip this loan 9 times, they would still owe the original $300 plus they would owe $450 in fees which translates to 400% interest. The Center for Responsible Lending shows research that 76% of payday lending revenue is from these flipping loans. One payday lender commented proudly that their loans netted 195% to 1092% interest from their clients.

Car Title Loans Car title loans are similar to payday loans except, instead of using your future paycheck as collateral, they use your car. You will receive an amount less than the NADA or Kelly Blue Book value on your car, because if you default on your loan payment, they can legally seize your vehicle and sell if to cover your loan.

Rent-to-Own Stores Rent-to-own stores are just like they sound. You can rent appliances, furniture, electronics, computers, etc. for a specified period of time or for keeps. Lets say you dont have a lot of funds, but you want a sofa. You hop in the car and head for the nearest rent-to-own store and are greeted by a helpful salesman who draws up a rental contract. With a signature and very little cash up front, you now have a sofa to take home. The catch: this used sofa was worth $800, but through a rent-to-own program, you will finally own it after 1 years of payments which total about $1,600. In other words, you paid for the sofa twice for the convenience of monthly payments.

Keep in mind that with only one late payment you lose your invested money and the furniture (remember it was only a rental). And dont forget the black mark on your credit report for missing your payments.

Pawn Shops

At a pawn shop, you can trade your things like jewelry, electronics, video games, cameras, tools, guns, in exchange for a short term loan. You trade your precious item for to of what it is worth, depending on the store policy. In exchange, you will get the cash and a pawn ticket. If you lose that magic pawn ticket, or neglect to make the payments, the pawnshop will sell your item to cover your loan.

But, lets say you made your payments and return with your ticket. You are still charged interest on your loan, often around 24% APR. Many pawnshops also charge appraisal, handling, insurance, and storage fees which can equal about 300% APR altogether.

Refund Anticipation Loans (RALS) Refund Anticipation Loans or RALS are cash advances on your future tax refund check. Altogether, various charges on RALS can reach over 700% APR. If your actual refund is less than you had hoped you are responsible for the difference, and any associated fees for late payment.

The Solutions ALWAYS READ THE FINE PRINT. Dont sign anything until you are comfortable with the terms and conditions. If you dont understand something, ask. If you dont agree with something, dont sign it.

Know your rights. If you feel that you have been treated unfairly, seek help. Following are a few helpful resources: Better Business Bureau www.bbb.org Wyoming Division of Banking audit.state.wy.us/banking/ Legal Aid of Wyoming www.lawyoming.org/ Federal Trade Commission www.ftc.gov Wyoming Attorney General's Consumer Protection Unit attorneygeneral.state.wy.us/consumer.htm

Taken from an article by Karen Richel in University of Idaho Extensions Idahos Two ent tips newsletter. Bill Taylor Weston County Extension Office The University of Wyoming is an equal opportunity/affirmative action institution.