Like the Grinch of Whoville fame, the Payday Grinch can put a real damper on the holiday season. Instead of stealing gifts and holiday ham, the Payday Grinch offers short-term financial products with high fees that can sap working families’ assets and threaten their financial security. Families are struggling to make ends meet, between the weak economy and the pressures of holiday shopping, so the temptation to visit the Payday Grinch can be particularly strong. These families should tread carefully: a payday loan of a couple hundred dollars can carry triple digit interest rates and result in serious financial and even legal trouble.
The Monsignor John Egan Campaign for Payday Loan Reform will be taking to the streets with a real-life Payday Grinch and holiday carols designed to warn consumers of the dangers of payday loans. On December 13 at 11am, we’ll be joined by representatives from Citizen Action/Illinois, Project IRENE, Protestants for the Common Good, Sargent Shriver National Center on Poverty Law, and the Illinois Department of Financial and Professional Regulation outside of a PLS Loan Store in downtown Chicago to sing payday carols and educate consumers. We invite you to join us!
You may be wondering how the new consumer protections for payday loans signed earlier this year by Gov. Quinn fit in. These protections will close a long-standing loophole that allowed 700 percent payday installment loans to trap borrowers in a costly cycle of debt. All payday loans will be subject to a comprehensive interest rate cap and other important consumer protections, such as a limit on the amount of time a borrower can be in debt, a prohibition on unaffordable balloon payments, and ability to repay requirements. However, these protections will not take place until March 2011, so families shopping this holiday season are still at risk of high interest rates and long periods of indebtedness.
The Egan Campaign suggests that families hard-pressed by the holiday season get help with budgeting from a reputable consumer credit counselor. For borrowers with short-term credit needs, we recommend seeking out lower-cost options, such as borrowing from savings, obtaining a cash advance from an employer, or taking out an alternative small consumer loan with lower fees from a credit union or community bank.