As I meet with my clients, there are increasing numbers of short-term loans listed in their debt summaries. These loans are normally advertised on the internet for fast and easy money for those who need immediate cash.
It is quite easy to qualify for these loans, if you supply the information the lenders request: 2 months of bank statements, voided check, and a personal ID and If you are approved, you will receive the funds the next day.
As you can guess, these lenders are now being sued by the U.S. Consumer Financial Protection Bureau (CFPB) throughout the country. However, many of the lenders have been following these practices since 2003.
These loans are referred to as “predatory” loans. These companies target desperate individuals who are in serious financial difficulties. They have run out of all options to borrow money and now must turn to these unscrupulous organizations.
The interest rates range from 24% to 149%. In addition, there is usually an origination fee of 5-10% add to the interest rates. You can imagine how quickly the amount you owe increases.
Attorneys for the “predatory” lenders claim that the 2010 Dodd-Frank law that created CFPB do not allow any caps being placed on interest rates.
These loans are unsecured and, if you file bankruptcy, these “predatory” lenders do not have to be repaid. However, the lenders usually come out ahead with the enormous interest rates they are charging since not everyone files bankruptcy.
One Cash Call short-lender, J. Paul Reddam, can’t be doing too poorly; he owns a racehorse “I’ll Have Another”. I’ll Have Another won 2 of the 3 Triple Crown thoroughbred races.
Mr. Reddam may have to ride out to pasture and turn “I’ll Have Another” over to the Trustee, if he files bankruptcy…..