Worst Thing Ever

August 22, 2014

Occasionally, I’ll be in a conversation with a group of people and will throw out a random phrase and everyone has to give a quick response to it.  Recently, the phrase I threw out to the group at happy hour was “Worst Thing Ever.” One of my friends, without hesitation, blurted out “New York Yankees fans!” As the group was made up of lifelong Baltimore Orioles fans, we all agreed that Yankees fans can be obnoxious but they aren’t the worst thing ever…close, but not quite.

In order for the “game” to end, someone has to come up with an answer that satisfies the phrase thrown out or we have to have a funny answer that takes us down a sidebar conversation that never comes back. The next answer was “soggy french fries” and while they were viewed as a bad thing, not quite the worst thing ever.  Neither was “crying babies on a plane” or “people driving 55 in the left lane.” Annoying? Yes! Worst thing ever?  Nope.

The answer that took us down the sidebar, maybe because it was the right answer or maybe because the group was intrigued to learn more about the topic, was “payday loans.”  Payday loans could quite possibly be the worst thing ever for a person’s financial life yet the business has grown exponentially and continues to grow at a rapid pace. So what is a payday loan?

According to this article, which talks about the potential end of abusive practices in the payday loan business,

Payday loans are typically doled out in small amounts — an average of $430, according to the Pew Research Center — that are due in 14 days.  All would be fine if borrowers could manage to pay the loans back in that amount of time, but most often they can’t.  That’s when things get expensive. A whopping four out of five payday loans are rolled over into new loans within 14 days, and one out of five new payday loans end up costing the borrower more than the amount borrowed, according to the CFPB.  In states that don’t cap payday loan interest rates, lenders are free to charge as high as 400% interest on unpaid loans, not to mention the fees they charge borrowers to extend their loan’s due date.  And when borrowers can’t pay, lenders can resort to aggressive tactics to recoup the money: they’ve been known to harass borrowers at work (illegal), take the money directly out of their bank accounts without notice (also illegal), and threaten to have them arrested (spoiler alert: illegal).

The worst part of these loans is that the people using them are those who can least afford to.  Many of the loans are taken out to pay utility bills so that electricity isn’t shut off, pay for medical bills for children or pay for groceries if a paycheck can’t be stretched far enough.  Payday loans prey on the lower socioeconomic classes and the practices are not always completely ethical.

If you are considering a payday loan or know someone who is or has, please do all that you can to avoid the loan.  You can ask our planning team a question on our Facebook page or submit a comment/question on our blog page.  One of our planners can help you find a solution to the situation that DOES NOT include the financial practice that might be considered the Worst Thing Ever.