Payday Loans — Predatory Lending, Payday Advances, Cash Advance

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A disturbing trend appears to be growing amongst the providers of our utilities. Across the country, as well as locally in the Phoenix area, many utility companies have closed the doors on a significant number of their on-site customer service centers. As a purported cost-savings measure, they are replacing these local service centers with chain-style retail outlets whose primary business typically includes check-cashing and payday loans. This forces consumers who need to make a payment in person to be exposed to and utilize the services of these predatory lending facilities.

Why is This a Disturbing Trend?

Unfortunately, many of the consumers that are so strapped for cash that they have to pay their utilities late (or at the last minute) are also primary targets for the predatory lending products that are sold at these retail outlets. High-cost check-cashing services and short-term, high-interest payday loans are typically the brunt of the business at these retail stores; a business that seems to prey on lower-income consumers who may be under financial stress. Given these circumstances, requiring these people to go to these locations to pay their utility bills exposes them to these “expensive products” and may result in them utilizing a service they otherwise may not have considered using, such as a payday loan. But of course, the advantage to the check-cashing storefronts is obvious as their potential customer base is increased with no advertising whatsoever!

Widespread use of check-cashing outlets didn’t attract much attention until lately, presumably due to the fact that only recently have these businesses branched into high-interest payday loans. In California, about 2500 retail locations are licensed to make payday loans. According to the California Department of Corporations (who licenses payday lenders in the state), 952,000 payday loans were made in the state last year, with an estimated value of approximately $2.5 billion dollars.

A nonprofit research organization entitled the “National Consumer Law Center” issued a report in June that identified 650 payday loan companies that accept payments for 21 utility companies across the United States. The report stated these payday lenders were pushing their other products on the consumers who pay bills in person; who typically were “low-income, minority, female, elderly”. It stated that they are “prime targets for payday lenders”, and it urged utilities to sever those arrangements.

The utility companies will justify the shift to these storefront centers as a “convenience to the consumer”. Don’t buy it; they are also saving money, but do you think it is being passed on to the consumer? When is the last time the utility company lowered rates? We all know the answer to that one.

Arizona statutes regarding payday lending are available online at For other states, look for your state legislature online under “deferred presentment.” For kicks, read what the payday loan industry has to say at:

In Phoenix, Financial Fitness training is available at no cost from NHS Phoenix, Inc. Call 602-258-1659.

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