Services that Provide Loans Till Payday Facing a Tougher Economic Landscape

Feb. 15, 2011 - PRLog -- (Dover, DE)- January 2011 - This is because several states in the US have banned payday lenders due to the tendency of payday loans coming up with interest rates reaching up to 400%, while in some states lenders are flourishing due to new federal rules that limit the lending practices of conventional banking institutions.

http://www.eloanstillpayday.com/ One of the states with the most upheaval for loans till payday is in Montana, where 72% of voters in the November election opting to ban payday lenders from the entire state. The ballot initiative took effect on New Year’s Day, and currently caps interest rates at 36%. And as such many payday lending institutions are affected; in a report by the TheMissoulian, a newspaper based in Missouli, Montana, 7 out of 10 fast payday loan cash shops in the city have either closed or moved to another location. “Nobody’s going to make loans under 36 percent,” Steven Schlein, a representative of the payday lender’s trade association, said during an interview.

Other states have imposed a stricter stance on fast cash loan establishments as well. Ohio also passed a similar law 2008 by limiting interest rates at 28%, while Arizona allowed a law to lapse which allowed payday lenders to charge high interest rates. Advance America Cash Advance Centers Inc., one of Arizona’s leading easy payday loan services, has already closed all of its 47 locations in the state because of the law’s hiatus.

In other states, on the other hand, payday lenders are flourishing, According to a report by the Wall Street Journal, the number of loans till payday establishments in Florida have remained stable since 2007 despite hundreds of bank branches going out of business in the state. The report also reported a nationwide 13% drop of payday loan cash shops, from 23,600 in 2007 to 20,600 in 2009. The cash loans given out by these shops have also declined by 24% to $38.5 billion in 2009. This is in contrast with the increase of bank branches across the United States by 1.3% from 2007 to 2009, totaling nearly 98,000 branches.

However, the same report also shed light to a 51% decrease of loans issued by banks, giving out only $433 billion in 2009. This is mainly due to bankers hesitating to give out cash loans during a recession as well as new federal legislation involving credit card and other types of fees, of which payday loan cash shops have capitalized on. “We believe that we’re starting to see a benefit of a general reduction in consumer credit, particularly … subprime credit cards,” Patrick O’Shaughnessy, CFO of Advance America, was quoted by the Journal.

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About the Author: John McAdams

John is a freelance journalist specializing in personal and commercial finance. His articles have been posted numerous business newsletters, payday loan blogs and magazines all around the web. He currently lives with his wife, two children and a Labrador in Rochester, New York.

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