Aug 30, 2004
The Chicago Sun-Times ran an investigation of payday loans, which are particularly prevalent in Chicago.
People usually take out these loans because of sudden emergencies – high medical expenses, the threat of eviction and expensive car problems. Of course their pay is too low to begin with. Banks aren't willing to lend to them, so they turn to the payday loan office, which is quick to loan the money since it knows it'll get the loan back many times over. Before the loan is paid off, people have often handed over three or four or five times what they borrowed. The newspaper found that interest payments on this kind of loan averaged 512% a year.
The state legislature, when controlled by the Republicans before and the Democrats today, has refused to make these extortionate interest rates illegal, despite the fact they are higher even than what loan sharks charge on the street.
With good reason, postal workers call the payday loans offices "robbers." When workers can't meet the sky-high payments, judges routinely order garnishments from wages. Loan sharks may enforce their loans with threats by thugs. The payday loan companies get thugs from the court system to do their dirty work.