New study offers more data on pitfalls of payday loans

On Behalf of | May 28, 2013 | Chapter 13 Bankruptcy |

Visitors to our website likely appreciate that we don’t shy away from discussion about the issue of payday loans. Efforts to regulate the industry here in Texas were under way in the latest legislative session and ended without any resolution, leaving the state the only one in the nation without some form of restriction on these cash advance loans.

Those who tend to use the payday loan services are very often the ones who can least really afford to do so. While their financial need is such that it appears that these loans are there only alternative, what they often discover is that they fall behind, extend the loan for another fee and wind up in a cycle of ever-deepening debt. To get out of the cycle, viable alternatives for debt relief exist in the forms of Chapter 7 or Chapter 13 bankruptcy.

Evidence of the dangers of payday loans has been apparent for a good long time, but earlier this month there was yet some more provided by the Insight Center for Community Economic Development. The California organization’s finding is that not only do payday loans strip low-income families of much needed funds, they also undercut the economic potential of communities where they operate.

Specifically, the study determined that some $3 billion in interest money was siphoned out of the national economy due to payday loans in 2011. To its credit, this activity reportedly contributed some $5.5 billion to the economy and created 65,000 jobs. But if that $3 billion had been available for discretionary consumer spending, it would have meant 79,000 jobs created and a boost to the economy of more than $6.4 billion.

Debt relief isn’t much good if it leads to more anxiety and more trouble for the person trying to recover their financial footing. Those facing such difficulties need to know what options exist for them and the best way of finding out is by consulting an experienced attorney.

Source: South Florida Times, “Report: Payday Lending Drains Nearly $1B From Low-income Communities,” Charlene Crowell, May 6, 2013