Debt trap

‘Small loan’ bill would mean big debts for Oklahoma families

For many Oklahomans in financial trouble, payday loans can seem like a quick and easy fix. Borrowers can take out a payday loan for up to $500, secured by a post-dated check, usually for a period of 12 to 14 days. Under Oklahoma’s deferred deposit lending act, payday lenders can charge $45 in fees for a $300 loan, which amounts to an APR (annual percentage rate) of 391 percent.

While some borrowers turn to payday loans for an emergency car repair or other one-time needs, the industry’s successful business model is built on repeated borrowing by customers facing chronic financial difficulties. Data from Oklahoma’s payday loan database revealed that a majority of all loans went to borrowers who took out twelve or more loans over the course of a year—or an average of more than one loan a month.

David Blatt is Executive Director of Oklahoma Policy Institute. Find the rest of this article and more at okpolicy.org.