Payday dangers

Payday dangers

Columbus Dispatch: Payday loans always have been a mixed bag: They offer emergency cash to people in need, but whose poor credit histories otherwise would force them to rack up late fees, bounce checks or turn to illegitimate lenders, maybe even loan sharks.

But their harsh terms — rapidly compounding interest rates and fees that can add up to annualized charges of nearly 400 percent — often leave poor people worse off than ever, in debt they can’t escape.

An industry group says that online payday lending went from $7.1 billion in 2009 to more than $10 billion in 2010 — a sizable chunk of the overall payday-lending business, which is about $40 billion annually.

Government can best protect vulnerable borrowers by requiring full disclosure of all terms, so that borrowers understand that, for example, they have to repay their $100 loan with $115 within two weeks or see the debt grow larger each week. Consumer advocates and schools can help by making clear the dangers of payday loans.