Yeah. I see a lot of this when I go home to Western PA. For a lot of working class families, one emergency expenditure can make getting by nearly impossible. I've had family members wrapped up in these payday loans and they're set up so you're not able to get out. 1000% interest? Unreal.
This guy is going to jail likely because his loans were absolute crap. But 1000% interest in itself is not particularly bad depending on the terms.
If I have a payday advance... let's say $1000 for example.
I get my cash today and the business gets it in a week.
The business charges me $20 for that service. Just as an example.... but a reasonable one.
Over the year... on $1000 I will pay 52 (weeks) x $20 which is about $1000.
100% interest.
Now let's say, because I don't have a bank account I get my check cashed... as do many people.
$1000 check. I get the same $980 from the advance place. The advance place gets their check the next day.
Now the math gets fun...
The loan place is earning $20 on $1000 for 1 day. 365 (days) x $20 = $7300
700% interest
Personally, I would bet $20 would be low for a service like this. There is tremendous credit risk. Once bad check and you could use the equivalent of a year of payday advances.
My gym when I was in NJ... Retro Fitness, charged me $50 for a late fee on my $19.95 monthly dues (when my cc expired) even though I was walking into the gym each day.
By the time they sent a letter my fees were up to $100 (after a month they have the decency to send you a letter).
That's 500% in TWO MONTHS. Annualized that is 3000%.
Fees/Interest and percentages are not always cut and dry.
Collectors are some of the worst people. My daughters phone number is apparently from some guy who couldn't pay his bills. Even 2 years later she is getting harassing calls... and people saying she won the lottery.
LdN
