News You Can Use: Payday Loans: A Trap for Working People

Payday loans are short-term loans with huge interest rates (often exceeding 400 per­cent annually) and high application fees.

They typically last for two to four weeks, and if the borrower is unable to pay in full, lenders renew the loan with another application fee. Payday lenders often insist the bor­rower agree to automatic payments from a bank account.

The only qualification to take out a payday loan is a regular check, typically a pay­check. Payday lenders also target senior citizens who receive a social security check.

New York has a 25% interest rate cap, which in effect makes payday loans illegal. That is why we do not see payday lenders operating from storefronts as in some states.

However, payday lenders market their loans through the internet and by phone. Many thousands of New Yorkers, who need funds for an emergency or for everyday expenses, have fallen into the payday loan trap through these means.

Payday loans are bad because they cost so much. The high interest rates and fees make it nearly impossible for borrowers to pay down the debt on a payday loan.  Instead, most borrowers find that they are trapped in a payday loan cycle they cannot escape.

District Council 37 is actively involved in keeping the door shut to payday loans. Your union is part of a statewide coalition to stop payday lenders from making these predatory loans to New Yorkers.

Legislation is currently pending in Albany that would allow check cashing establish­ments to make small-dollar loans. These are nothing more than payday loans. They would be very costly and harmful to working people and senior citizens. DC 37 opposes this legislation.

Call your Assembly Member or Senator and demand that he or she (1) • oppose legislation to allow check cashers to make loans and (2) fight any other attempts to legalize payday lending in New York.

If you have a payday loan now and are eligible for help from DC 37’s Municipal Employee Legal Services, call them at 212-815-1111 for legal advice.

To stop automatic deductions of a payday loan, contact your bank. You can file a complaint against a payday lender, debt collector or bank that refuses to stop automatic withdrawals, with the NY State Dept. of Financial Services at or by calling 212-480-6400.

Sources: The New Economy Project, New Yorkers for Responsible Lending and DC 37’s Municipal Employees Legal Services

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