PREDATORY LENDING Be a SMART Consumer!

WHAT ARE MY RIGHTS AS A CONSUMER? SAFETY SERVICE CONSUMER EDUCATION TO BE INFORMED TO BE HEARD TO CHOOSE

Consumer Culture pages Ads-turning Wants into Needs Commercial ‘pulls’: ads, malls, status, and kids (p 46) Use Rule of Three (p 46) Caveat emptor- buyer beware (p 47) You have rights (p 47)

PREDATORY LENDING What is predatory lending? What are signs of a predatory loan? –Cash or other incentives –Income padding –Balloon payments –Large prepayment penalties –Signing over your deed –Unnecessary insurance

PAYDAY LOANS Discussion –What is a payday loan? –Who uses payday loans? –What is required to get a payday loan? –How big is the payday lending industry? –Who makes payday loans?

COST OF A PAYDAY LOAN For a two-week payday advance, a borrower will pay at least $15 for every $100 borrowed. Loan fees are equal to roughly a 400% annual percentage rate. Costs 5 million Americans $3.4 billion annually. Societal Costs-borrowers struggle to pay other bills (rent, electricity and even groceries).

COST OF A PAYDAY LOAN (see page 58) The typical payday loan is more than twice as expensive as a credit card late fee, and much more expensive than paying bills late. The debt trap forces payday loan borrowers to pay fees every two weeks. In the end, revolving payday loan fees increase debt loads and financial hardship, leading people into bankruptcy rather than helping them get back on their feet.

SIGNS OF A PREDATORY PAYDAY LOAN Triple digit interest rate Short minimum loan term Single balloon payment Loan flipping (extensions, rollovers or back to back transactions) Simultaneous borrowing from multiple lenders No consideration of borrowers’ ability to repay Deferred check mechanism Mandatory arbitration clause

ALTERNATIVES TO PAYDAY LENDING A payment plan with creditors Advances from employers Credit counseling Emergency assistance programs Overdraft protection at a bank or credit union Credit union loans Cash advances on credit cards Military loans Small consumer loans

TYPES OF PREDATORY LENDING Rent-to-own Pawn Shops Auto Title Pawn Sale and Lease Back Auto Brokerage and Subleases Hard Money Leases Tax Refund Anticipation Loans

TYPES OF PREDETORY LENDING, CONTINUED Voluntary Wage Assignment For Profit Debt Counseling Credit Repair Scams Get Rich Quick Schemes Telemarketing Scams Lottery and prize sweepstakes

AVOIDING BORROWING PITFALLS Say NO to "easy money." Shop around. Understand the loan terms. Find out about prepayment penalties. Make sure documents are correct. Make sure documents are complete Ask about additional fees. Understand the total package. Work with credit counselors. If you’re not sure, don't sign!

FRAUD & IDENTITY THEFT Identity theft is when someone steals your personal information to use for illegal purposes. It is a crime that can damage your reputation, and your peace of mind. You can reduce the possibility of becoming a victim by keeping your personal information secure.

AVOIDING IDENTITY THEFT Guard your financial information. Keep your social security number confidential. Beware of imposters. Keep your mail safe. Get off credit marketing lists. Stay Safe online. Memorize your passwords and PIN numbers.

AVOIDING IDENTITY THEFT, CONTINUED Lock it up. If you are on active duty in the military, put an active duty alert on your credit files. Check your credit reports regularly. Be cautious about offers for credit monitoring services. Help is a phone call or click away. –Federal Trade Commission –

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