Payday Lenders working differently in different countries

Meet Mrs. Brown from Austin. She finds herself “looking out of the window every night” wondering if Payday lenders are going to appear suddenly to repossess her cars. In 2008 Mrs. Brown took out a loan of 5000 dollars, and then soon after another loan for 2400 dollars. With both loans she used her two cars as collateral. Having lost her job due to her Mother falling ill and taking too many days off to tend to her, Mrs. Jones found herself first using up her savings, then selling her townhouse and as a final resort turning to Payday loans. She now finds herself in the impossible situation of being trapped in a debt that she can not pay off. As she helplessly watches these loans double and triple in size she “may as well gone and got herself a Bentley or Mercedes Benz”.

Tracey Robertson works as a nurse and had a decent amount of money saved. The last thing that she thought she would need was a visit to a Payday lender. She then lost her job unexpectedly and ended up signing the title of her car over to a Payday lender.

Just like Mrs. Brown and Tracey Robertson, many Texans sign their motor vehicles over to Payday and auto-title lenders every month. “You’re like a hamster in a wheel,” says Tracey.

The state of Texas has, so far, not put any regulations on the Payday lending industry. The Center for Responsible Lending dubs Texas as a state “without meaningful regulation of payday lending.”

It seems that much like the UK most of the people that take out Payday loans are in the low-income bracket.  Texas is one of the states that does not regulate the Payday industry and quick loans are available at record annual interest levels of up to 439 percent. This in comparison to the average 339 percent found throughout the rest of the country. In general the residents of the state of Texas take out larger short term loans than that of the rest of America. The average amount that one person will apply for is 468 dollars, while the nationwide average is 392 dollars.

The Payday industry in the USA has spread to what is now known as the Auto-title lenders. Immediate loans are granted using the borrower’s vehicle as collateral. In 2013, Texas alone saw some 38 thousand cars repossessed.

Amid much criticism, Texas is being pushed to pass legislation to control the Payday industry, however even institutions set up to protect the “innocent” have their misgivings. Bill Peacock of the Texas Public Policy Foundation believes that by restricting the policies of the Payday lenders, government would be causing even more damage. Mr. Peacock says, “If these loans are so bad for consumers, why are consumers entering into them?”

And so the redundant question arises. If your Mother gets sick, and there is no possible way to get your hands on the money you need to look after her, it seems you are going to have to let your cars look after her.