Mayor of Laurel, Mississippi tries to fight significant fees and high interest rates in the payday loan industry. According to Mayor Johnny Magee, payday lenders promised his father quick and cheap money, but the loans came with triple-digit interest rates and exorbitant fees. And because some Mississippians are unable to obtain loans from traditional banksthe mayor claims they are financially harmed by payday lenders.
What are payday loans?
A payday loan is a type of short-term loan in which a lender grants credit at a high interest rate based on your income, for example Investopedia. The loan principal is usually a percentage of your next paycheck.
It is important to remember that payday loans often have high interest rates as they are generally used for short-term emergency credit. However, according to The Guardian“Most borrowers use payday loans for their basic needs, and the more they borrow, the deeper they sink. Invariably, their balance is transferred into a new loan, with each additional turn inflicting more and more costs.”
Government officials can act quickly
Mayor Johnny Magee wants City of Laurel employees to take a free financial literacy course to learn how to budget, improve their credit scores and stop relying on payday lenders. “We thought it was a good way to help working citizens of the city have a better financial future,” Magee said in USA today.
It should be noted that state governments may impose regulations to limit the interest rate on payday loans. For example, Nebraska has capped payday loan interest rates at 36%, according to CNBC. So many people are hoping something similar will eventually happen in Mississippi.
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