Payday Loans Carry Hefty Price

Monday, December 15th 2008, 7:46 pm
By: News 9

By Melissa Maynarich, NEWS 9

OKLAHOMA CITY -- Every year at Christmas consumers spend more money, but this year the source of that spending money may be a little different.

Signs are scattered on city streets that read, "Short term loans" and "Get Cash in Minutes."

"I have a part time job which is necessary, but when business got so bad, they cut all their part time help down to 10 hours a week," employee Bobbie House said.

House committed to a six month loan to help her purchase Christmas gifts.

A report on Oklahoma's pay-day lending industry revealed more than $1 million loan transactions from July 2007 to June 2008.

"They're called payday loans. They're called cash advances," said Oklahoma City University's Dean of Business Vince Orza. "Basically, they're the most expensive way to borrow money."

In some cases, a person that borrows $100 to be paid back in two weeks, will be charged $15 interest, which is 391 percent annualized.

"If you're in a financial pinch, go talk to your credit union...go talk to your bank," Orza said. "No matter what they're charging you it's typically always going to be less than what you pay for a cash advance loan."

Lenders in the industry claimed Oklahomans with poor credit loans should be used for short-term emergencies, and it's not in the best interest of the consumer to repeatedly roll them over.

A 2003 Oklahoma state law specifically authorizes payday deferred deposit lending and sets maximum interest rates.

State law specifically requires payday lenders to warn customers that the loans are not intended to meet long term needs.