7 On Your Side
Payday lenders have another way to get around the system
Payday lenders have found yet another way to bypass regulations and charge borrowers four- digit interest rates.
Here in California, the interest rates must be disclosed in plain view and borrowers can't get more than $300 at a time.
Payday lenders have found they can get around those limits by setting up shop online. Some online payday lenders charge annual percentage rates of more than 1,000 percent. Others have moved to an Indian reservations where they say state and federal laws would not apply. One person paid an interest rate of 3,000 percent.
Reporter: If you had known at the time that you would pay $1,400 for a $400, would you have done it?
Pay day lending customer Kimberly Wright: Never, never.
Reporter: But you needed the money?
Wright: I needed the cash, but I probably would have gone someplace else. Maybe I would have looked a little bit harder.
Although many pay day lenders are mom and pop shops, others are owned by major banks and major financial intuitions.
loans, 7 on your side, michael finney
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