Overview
Predatory lending practices trap some of America’s most vulnerable
consumers in spirals of debt. MASSPIRG is fighting these abusive
practices in a number of industries:
Rent-to-Own
The predatory rent-to-own industry promises consumers the American
dream of owning products like televisions, refrigerators and even car
wheelsets. But their “rentals“ are actually high-interest loans,
chiseling unwitting consumers with interest rates of up to 230 percent
APR and other charges. Wisconsin, Vermont and Minnesota have acted to
protect their residents from rent-to-own outfits with rate disclosure
requirements, while New Jersey has capped interest rates at an
affordable 30 percent APR. Unfortunately, other states have
enacted laws that protect this predatory industry, and an
industry-backed bill in the U.S. Senate—S 603, the Consumer Rental
Purchase Act (Landrieu, La.)—seeks to preempt, or override, these
strong state consumer protections.
Payday Lending
Borrowers at “payday lending“ outfits are often middle- or low-income
families who need a small boost to make ends meet. These families think
they’re getting a short-term loan, but most will end up with serious,
long-term debt. In New Mexico, for instance, where predatory lenders
operate freely, the average borrower faces such high interest rates
that they have to roll over the loan 6 times on average. A two-week
loan turns into a three-month loan, and with interest rates of up to
500 percent, the borrower is quickly paying more in interest than the
original amount of the loan.
