Many consumers and advocacy groups have spoken out against a kind of credit known as payday lending, which they contend can be predatory and unfairly target low-income borrowers.
Now, in Birmingham, Ala., displeasure over this type of lending is becoming more vocal and visible, according to a report from the Birmingham News. A demonstration sponsored by the Birmingham Faith In Action group recently held a protest against payday lending, hoping to draw attention to the problem.
What the protest organizers wanted to accomplish was for the city to adopt a zoning policy that would make it impossible for one payday lender to open its doors less than a mile from an existing one, as well as from welfare offices, the report said. This issue is important to city residents because while Birmingham currently bans new payday lenders from setting up shop within city limits, that restriction will be lifted in September. Prior to the ban, the city had a greater concentration of payday lenders than any other city in America.
The problem for these residents is how badly a payday loan can affect all aspects of a borrower’s life. In many cases, seeking one leads to the necessity to obtain more, as a result of high interest rates and other troubling loan terms. The high cost involved is often difficult to cover for most borrowers with limited incomes.
“Three out of four payday loans are used to try to pay off other payday loans,” Quinn Rallins, director of Birmingham Faith in Action, told the newspaper. “There’s a difference between businesses making a living, and making a killing.”
Payday loans may be particularly troublesome because they often don’t require a credit check for those seeking them. As a consequence, many who may not even be creditworthy are given access to these funds with the caveat that they will have to pay back the balance in full within a relatively short period, despite the fact that many may not be able to do so.
Image: rink justice, via Flickr