Home About ATN

News

Soaking the Poor

Sep 04, 2008
Do you want to know what it’s like being poor in America? It’s borrowing on the value of your next paycheck, and paying a 36 percent annual interest rate on the loan, if you’re lucky, and 500 percent and up if you’re not. It’s hocking title to your car for thirty days on the same handsome terms and losing it if you miss a payment, even if your vehicle is worth twice what you borrowed on it.

A recent study from the Consumers Union, the National Consumer Law Center, and the Consumer Federation of America lays it all out for us. They graded the 50 states on their laws regarding four “Short Term Loan Products,” which is what poor people live on from paycheck to paycheck. The states are left alone by the federal government in setting interest rates and other terms for these loans, which typically vary from $250 to $1,000.

The annual percentage rate (APR) on many of these loans is 36 percent, a cap common in state law and one recently endorsed by Congress for certain loan products extended to active-duty service members. However, many states have significantly higher APR caps or no cap at all. The Scorecard1 produced by the consortium of consumer groups gives a Pass or a Fail to four products: A two-week, $250 loan (often called a “payday” loan); a one-month, $300 auto-title loan; a six-month, $500 installment loan; and a one-year, $1,000 installment loan. If the states have a criminal usury law, the Scorecard also graded that law. The criterion used for grading these loans was whether the APR caps were 36 percent or below (Pass) or above 36 percent (Fail).

I live in Vermont and work in New Hampshire, so those two states were of particular interest to me. Vermont receives a passing grade in all five areas; it prohibits the first two types of loans and caps interest on the installment loans at 24 percent. New Hampshire, the “Live Free or Die” state, is a different matter. They fail all four loan categories, which have no APR caps at all, and were not graded on their criminal usury law because they don’t have one. This is arguably better than Missouri, where the cap on a $250 payday loan is 1,955 percent.

The “Show Me” State? They should call it the “Screw Me” State.

Find out at the link below the extent to which your state punishes the poor for being broke.
____________________
1The Scorecard (.pdf). (Accessed August 30, 2008)
tags: Poverty | Business

Copyright © 2008 All Together Now.

Contact Us

Webmaster |

Services

TwitterEmail AlertsTimeWeather

QuikLinx

The End of LibrariesNew Political PartyNoted with Interest

Archives

December 2016November 2016October 2016September 2016August 2016July 2016May 2016April 2016March 2016February 2016January 2016December 2015November 2015September 2015April 2015January 2015November 2014July 2014March 2014December 2013November 2013October 2013September 2013August 2013May 2013April 2013March 2013February 2013January 2013December 2012November 2012October 2012September 2012August 2012July 2012June 2012May 2012April 2012March 2012February 2012January 2012December 2011November 2011October 2011September 2011August 2011July 2011June 2011May 2011April 2011March 2011February 2011January 2011December 2010November 2010October 2010September 2010August 2010July 2010June 2010May 2010April 2010March 2010February 2010January 2010December 2009November 2009October 2009September 2009August 2009July 2009June 2009May 2009April 2009March 2009February 2009January 2009Oct-Dec 2008Jul-Sep 2008May-June 2008