Public Employee Press

Don't get ripped off by
PAYDAY LOANS

By ALFREDO ALVARADO

When New Yorkers are strapped for a few extra dollars to pay for an unanticipated expense, they usually turn to family and friends, maybe their credit union or a credit card cash advance. Increasingly, however, people around the country are turning to payday loans.

With TV and Internet ads promising "instant approval" regardless of credit status, payday loans from companies like Advance Me Today and My Cash Now can be very tempting. Since these loans are typically between $500 and $1,000, borrowers feel they won't be saddled with a huge debt and can pay it off within a couple of months. A payday loan is a very high interest loan taken against your next paycheck.

Payday loans are illegal in 18 states, including New York. But the 20,000 payday lenders use the Internet and offices in Costa Rica, Belize and the West Indies to avoid the law, and even in New York, banks let the lenders automatically withdraw payments from borrowers' bank accounts.

Local 1549 member Shavon Lewis, an Eligibility Specialist II, needed a small loan to pay for her daughter's middle-school graduation. The Brooklyn resident had no idea that borrowing a small amount of cash would create such a big headache.

After taking out a $500 loan in 2010 and making several payments she noticed unauthorized withdrawals from her checking account, but when she moved to close the account, she got a flood of harassing phone calls. "They called my house, my job, my family," said Lewis. "Then they threatened to take me to court and cursed me out. I just wished them a blessed day and hung up."

Under federal law customers have the right to stop the withdrawals, but banks drag their feet on these requests. Lewis read a Public Employee Press article about payday loans and followed the advice to call DC 37's Municipal Employees Legal Services. "Legal Assistant Sonia Jackson helped me understand my legal rights," said Lewis.

Latest scheme: Let check cashers make high-cost loans

Like Lewis, Ansari Abdullah wanted to help his granddaughter with her school expenses. Retired after 34 years as a Construction Laborer and member of Local 376, Abdullah was paying off a $900 payday loan through deductions from his bank account. But after several payments the amount owed did not drop, so he went to JP Morgan Chase, which charged him $32 - three times - to stop the withdrawals. After getting threats from the lenders, he closed his account and changed his telephone.

"They're worse than loan sharks," said the Brooklyn native. Even though he made payments, the amount of his loan grew, but his bank finally stopped the deductions. Because payday loans are illegal in New York, payday lenders and debt collectors are prohibited from collecting on these loans from New York residents. Gov. Andrew Cuomo and the Dept. of Financial Services made this clear in a recent letter to all debt collectors.

New York caps personal interest rates at 25 percent, giving it one of the toughest laws against payday loans, but check cashers are now aggressively pushing legislation to let them make the loans - which could have financially devastating effects on vulnerable New Yorkers. This legislation would allow loans at triple-digit interest rates (including the high fees) without regard to people's ability to pay and open the way for a new wave of predatory lending.

DC 37 is part of New Yorkers for Responsible Lending, a 150-member coalition fighting the proposal in the Legislature.

"These lenders are unscrupulous and they target the economically vulnerable, just like the subprime mortgage lenders did," said DC 37 Executive Director Lillian Roberts. "So we'll do everything we can to stop this legislation."

"The best strategy for members is to avoid these loans completely," said MELS Associate Director Robert Martin. "Join a good credit union if you need a small loan."

Don't be a victim

• Don't take out a payday loan!
• If you have a payday loan, call DC 37's Municipal Employees Legal Services at 212-815-1111.
• To stop automatic deductions on a payday loan, contact your bank.
• File a complaint against a payday lender, debt collector, or bank that refuses to stop automatic withdrawals with the New York State Dept. of Financial Services at www.dfs.ny.gov or call 212-480-6400.
• Call your representatives in the State Assembly and Senate. Ask them to oppose legislation to allow check cashers to make loans and fight any other attempts to legalize payday lending in New York.