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Should fees charged by payday lenders be capped?
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Steep fees for check cashing, money transfers and debit transactions eat into the meager incomes of people without bank accounts, according to financial analysts. The financial services industry is looking for new ways to capitalize on this growing group.
“There’s a lot of money to be made in dealing with the lower-income population, as long as you don’t give them a bank account,” said Richard Bove, a bank analyst based in Florida.
More than 820,000 additional U.S. households have become unbanked, a .6 percent increase, since the FDIC’s first survey in 2009. More than half of unbanked households said they don’t have an account because they believe they don’t have enough money or that they don’t need or want an account, the FDIC reported.
Payday lenders provide cash advances with annual interest rates that can be more than 400 percent. Iowa Sen. Joe Bolkcom, D-Iowa City, has proposed legislation in recent years to limit the interest rate to 36 percent, but the bills have been defeated.
Do you think Iowa lawmakers should cap the interest rates that payday lenders can charge?
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Banking fees are not the problem. The real problem is that people cannot find a job because the Democratic Party has ruined the economy and President Obama is standing on its neck. In a prosperous economy people would be able to aford a bank account. Today more and more people are being driven onto food stamps and into poverty because the economy is not producing jobs. Jobs will NOT be created by raising taxes – anyone who thinks so does not understand economics 101.
Sorry, Gary, but the current economic conditions are the result of both Democratic *and* Republican party folks. In addition, business leaders demanded reduced taxes to create jobs, but while they are enjoying record profits they are not hiring.
How about instead of typical partisan hogwash, you look into the real causes of- and solutions for- our troubled economy.
All lending in Iowa should be subject to the usury rates established. I believe that banks are not allowed to loan any money at a greater than 21% actual percentage interest rate. Not only should payday lender be required to stay within this limit, all credit card issuers, no matter where they are located, hould not be allowed to loan money to any Iowans at a greater rate than 21%.
And just for Gary, George Bush II ruined the economy.
Yes, and while we are at it we need to take a look at the credit industry as a whole.
The payday lenders should be required to loan at no higher rates then the banks. they charge more interest, then the mafia loan sharks did in years long past.
@Gary Ellis please come back to reality. Both parties have created the economic mess…while the rich in both parties have gotten richer. No cap on capitalism please.
Mmmm… The payday lender may have a higher risk than the bank… I am not sure about that, though. I could not find the payday borrowers’ default rate.
But, what I think needs to be addressed are the fees to cash a check by retail outlets like Hy-vee and Walmart. I watched someone cash a $200 payroll check at Hy-vee. It cost $6. That’s 3%. So, let’s see what the apr is for that. Whrr…click…whrrr….. Comes to about 1095% apr.
Now, that assumes Hy-vee was out the money for a whole day. But if they verify the check electronically and deposit it that same morning, then we are looking at maybe 2200% apr.
If we just use the time it took for the service desk person to finish the transaction, less than five minutes, then we are looking at maybe (just guessing here)144000%
With almost zero risk… No federal paperwork…. Pretty good return on investment. And that was on a small check. The fee was significantly higher for larger checks.
In that light, payday lenders are a bargain.