When you drive down the street in Las Vegas, you see them everywhere: businesses with names like Rapid Cash, Check City or Advance America, promising you easy money. Those short-term loans average $375, have a term of about two weeks, and carry an average fee of about $55.
But some Nevadans are running into trouble just trying to pay them back. When they can’t pay their loans on time, there are few options. Consumers can default on their loan, or they can borrow again. Some will only pay the interest, giving them another two weeks to pay the loan back. But that extra time can be expensive, with another interest payment added to the cost of the loan.
“Generally, the biggest problem is the amount of interest that is charged,” said Barbara Buckley, executive director of the Legal Aid Center of Southern Nevada. “If they charge interest, you have to compare apples to apples. So if their interest rate is 521 percent APR, or $15 per $100. It is still a 521 percent interest rate.”
So, should Nevada put limits on payday loan interest rates? Or should we continue to be able to borrow money anytime we need it, not matter how high the interest rate?
“There is a perception out there that we are a terrible industry,” Thomas Leonard, executive director with the California Financial Services Providers Association. “These are rarely used products. Are there going to be people who abuse it? Absolutely. But there are people who abuse alcohol and cigarettes.”
Michele Johnson, President and CEO of the Financial Guidance Center
Barbara Buckley, Executive Director with the Legal Aid Center of Southern Nevada