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Busi 620

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Business
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City College of San Francisco
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BUSI 620: DB Forum 6 1 BUSI 620: DB Forum 6 Student’s Name Institutional Affiliation BUSI 620: DB Forum 6 2 BUSI 620: DB Forum 6 Question 5: Interest on Payday Loans and Approach of Christians to Loans to the Poor Payday loans are small, short-term, single-payment advancements steady earning individuals so that they can be cashed on their next payday. The loans are given against a postdated check which the borrower assigns the lender to deposit once salaries have been paid if the borrower does not pay in lump sum. Payday loans carry huge interests (usually APR’s of above 300%) mainly because of their short-term nature, mostly two weeks (Flannery and Samolyk, 2005 pp1). The interest rates charged on these loans is extremely high, considering the majority of its borrowers are low earners faced with an emergency financial crisis. With annual percentage rates estimated between 300%-700%, many have termed payday loans as exploitive, predatory and unjust (Elliehausen, G., 2009. pp 1). They are so high to the extent that many borrowers are unable to repay in full and end up rolling the loans over to the next month or borrowing from other lenders to settle the initial loan. Identified as the best example of usury, payday loans have been treated differently in the US with states either burning the practice or implementing interest rate caps that regulate the interests charged. For instance, the states of Pennsylvania, Massachusetts, Maryland, Vermont, West Virginia, and Conn ...
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