Money Watch
The pitch: “Get cash now with a payday loan!â€
The problem: Payday loans, which the borrower promises to pay back plus a fee in a short period, are perfectly legal. But some online payday loan companies don’t disclose the annual percentage rate (APR) on the deals, as required by law, according to the Federal Trade Commission.
The settlement: The agency announced last week that two online lenders -- We Give Loans and Allyah Associates (also known as American Advance) -- have agreed to include loan APR information on their websites from now on. The agency had filed official complaints against them. Neither company was fined nor admitted violations as part of the settlements.
The loans: The loans are short term in most cases, typically due the next payday. But the fees amount to huge APRs. For example, the agency said a typical minimum fee of $10 on a $100 payday loan for a 14-day period amounts to an APR of 260%. A fee of $20 on that loan sends the APR to 520%.
Military: As of October, the APR on payday loans made to service members and their dependents cannot exceed 36%, under federal law.
Info: The FTC has information on payday loans, including alternatives, at www.ftc.gov /bcp/edu/pubs/consumer/alerts/alt060.shtm.
-- David Colker
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