re: Just took on a client who took out pay day loans

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Pay day loans are a sleazy business but very profitable. I guess if one had no conscience it would be a very good business to get in.

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Most of these payday, class C, lenders are owned by the banks (Security Finance owned by Security National Bank type thing). I used to see some of the rural bank branches have an adjoining payday loan office include an inside door between them so the customers would not even have to go outside to get their payday loans when the consumer loan from the bank was denied. Oklahoma made them brick/sheetrock over those as it was too obvious some of the places were denying lower interest consumer loans to prop up their payday business intentionally.

Charging the maximum ANNUAL rate on a 60 day note, then rolling that note every 31st day when debtor has become in arrears 2x (biweekly or bimonthly pmts), even w/out the fees is extreme. Collect that 36% today, again in 31 days, again in another 31 days...

Oh, precomputed loans, those use the "rule of 78's" to collect all the interest 1st for a Class B lender. Class B being the type that is capped to $10k over 6 years unless using a mortgage on real estate. Precomputed loans are outlawed in many states as technically there's no penalty for early payoff but yet all the interest is collected in the 1st 10 months of the loan even if it's a 3-4-5-6 year note.

Class B Lenders are the ones furniture and appliance stores use for "X days same as cash" promos. The store gets 95% of the sales price from a lender who buys the 30,60, or 90 day paper from the store and holds about 3% back for bad paper. Easier credit qualifications than a bank loan, fast and easy for retailer, supplies a client list for the loan company to solicit for additional loans. Class B will make the 18%-30% loans to people a bank turns down for minor blips.