You’ve probably heard the commercials on radio or TV that advertise a “Payday Loan to help you make it through to your next paycheck!” It sounds simple. But beware. According to the National Consumer Law Center (NCLC), “Payday loans trap consumers in terrible cycles of debt, dragging their families more deeply into financial crisis.” That’s why Payday loans are illegal in Massachusetts Pawn Shops and why Empire Loan does not offer them at any of their 8 locations, even Rhode Island.
Here’s how it usually works. A payday lender will ask the customer to provide a post-dated check for the amount borrowed, plus a fee. The check is held until the next payday at which point the borrower pays back the full amount of the loan. Payday lenders encourage customers to refinance their loan with yet another loan, creating a never ending cycle for the customer while the payday lender keeps charging fees and high interest rates.
The Center for Responsible Lending says, “The typical payday loan borrower is indebted for more than half of the year, with an average of nine payday loan transactions at annual interest rates over 400%.” They go on to say that, “Since 2005, no state has authorized this high-cost loan product.”
This practice has been outlawed in Massachusetts as the federal government continues to look at ways to stop these predatory lenders from bilking hard working consumers.
Michael Goldstein, President and Founder of Empire Loan, a chain of 8 New England based pawn shops, has lobbied politicians in Washington to try and put a stop to the practice. “These trap loans are the most disgraceful practices in the country, with companies literally taking people’s hard earned money and giving them no way out,” said Goldstein. “At Empire Loan’s 8 locations, we work with our customers to help them through their tough times and explain to them how to get through the process and retain ownership of their merchandise. That’s why Empire has grown; it’s the way we treat people that sets us apart.”
Payday loans may sound like a quick and easy solution to your financial problems, but Goldstein has one serious warning: “Borrower Beware!”
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