The number of payday lending businesses in Wyoming has more than doubled and the amount of money lent by those businesses has more than tripled since 2000, according to a children’s advocacy organization that supports legislation to rein in the industry.
Payday loans trap families in cycles of debt and ever-deepening poverty, representatives of the Cheyenne-based Wyoming Children’s Action Alliance said Thursday.
“Rather than providing them with the kind of loan that helps them get back on their feet, it sort of sucks them into a debt trap,” the alliance’s Marc Homer said.
A representative of the industry said banks and credit unions can’t provide very small loans and growing numbers payday loan shops only reflect growing demand by consumers for short-term credit.
The alliance announced that it is supporting pending federal legislation that would cap all consumer loans including payday loans at a 36 percent annual percentage rate.
Payday loans are effectively advances on a borrower’s next paycheck. The borrower pays a fee and writes a postdated check that the company agrees not to cash until the customer’s next payday.
People get into trouble when they fail to pay off payday loans promptly. When that happens, the fees add up - effectively becoming astronomically high interest rates.
In Wyoming, the fees work out to an average annual rate of 521 percent, according to Homer.