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Payday Loans Hurt Everyone

Since its inception, my wife and I have supported Spay Neuter Kansas City, a low-cost, urban core veterinary clinic providing subsidized services for pet owners with financial need. A number of SNKC’s clients have also been customers of payday loan companies.

Much has been in the news recently about payday lenders charging unconscionable fees to borrowers, trapping those vulnerable borrowers in a cycle of crushing debt.

The average charge on payday loans in the Kansas City area is 445% annual percentage rate, according to Eva Schulte, Executive Director of Communities Creating Opportunity, a local community organization that has fought predatory lending since the 1970s. Ms. Schulte cites a study showing that payday lending results in the transfer of a twenty-six million dollar wealth stream from desperate borrowers to payday lenders each year, just in the Kansas City area alone.

A recent article in the Kansas City Star detailed how one older man ultimately paid $50,000 in charges on $2,500 in payday loans taken out to cover his wife’s medical bills, eventually losing their home.

Payday loan burdens have led young families as well as senior citizens to seek help from emergency assistance programs in the urban core. B.J. Atkinson is the Director of one such program. She can recite from memory numerous instances of responsible folks who came up short on a utility bill or medical expense, and naïvely turned to a payday loan to cover the gap. Soon “they were sucked into the vortex of never-ending debt”, she says, and forced to turn to the church for emergency assistance.

Abuses by payday lenders have been so egregious that several area operators are currently facing federal charges for their alleged deceptions. The Consumer Financial Protection Bureau is trying to rein in abusive lending practices, but unfortunately some elected officials support the payday loan industry.

Champions of the on-line payday loan industry include U.S. Congressman Kevin Yoder (Kansas) and former U.S. Congressman Blaine Luetkemeyer (Missouri). In 2013 Messrs. Yoder and Luetkemeyer jointly wrote a letter to the U.S. Attorney General and the Chair of the FDIC, pleading with those two officials to permit on-line payday lenders to automatically debit the bank accounts of payday loan customers.

Payday lending not only traps desperate borrowers — it also burdens the charities that serve low-income families in the urban core. One wonders:

  • How much did demand on food pantries increase because payday loan customers did not have enough money for groceries after paying the interest on their payday loans?
  • How much additional strain was placed on soup kitchens and safety-net health clinics because of the outrageous fees paid to payday lenders?
  • How much additional fund-raising did charities serving the urban core have to do to help families hurt by payday lending?

Dr. Sharon Lee, founder and physician at Southwest Boulevard Family Health CARE, says: “Those of us who work to help the poor are undermined by these payday lenders who take advantage of the disadvantaged.   The cost is borne not just by our health care clinic for low-income families and our generous supporters, but by society as a whole.”

As a divorce and family law attorney, I see first hand the damage to marriages and harm to children caused by financial stress in the household. For a family to be caught in the payday loan trap puts extra strain on the best of marriages, and causes untold hardship to the children involved.

We are now learning how the payday lenders – and those who financed them – made their millions. What we don’t know is how those people sleep at night.

Richard Ralls of Ralls Law Firm can assist you in determining whether you can enforce grandparent rights. Call us at 913 236 7260 or 816 421 4222. Licensed in Kansas and Missouri.