Many of us have been, or are, there... when the bills add up to a little bit more than the balance in the checking account and the choice must be made as to paying which bill late will do the least damage. When these times roll around some lenders take advantage of the desperation and offer loans disguised as saving graces and which try to hide the very real potential of much greater long-term damage.

Payday Loan lenders proliferate in areas where low wage earners live, including members of the military. Erik Eckholm reports in The New York Times how payday loans can snowball:

Mr. Milford is chronically broke because each month, in what he calls “my ritual,” he travels 30 miles to Gallup and visits 16 storefront money-lending shops. Mr. Milford, who is 59 and receives a civil service pension and veteran’s disability benefits, doles out some $1,500 monthly to the lenders just to cover the interest on what he had intended several years ago to be short-term “payday loans.”

The DINKS, James and Miel share an article from Alternet which discusses the "fringe economy" of which payday lenders are major players:

There can be no doubt that the scope of the fringe economy is enormous. The Community Financial Services Association of America claims that 15,000 payday lenders extend more than $25 billion in short-term loans to millions of households each year. According to Financial Service Centers of America, 10,000 check-cashing stores process 180 million checks with a face value of $55 billion.

MSNBC posts an Associated Press report that Congress recently granted consumer credit regulation to the Pentagon to help curb the extensive use of payday loans by members of the military:

Pentagon officials said the problem was becoming an issue of military readiness, with spiraling debt causing service members to lose security clearances or become distracted from their missions.

I wonder why these regulations were only extended to the military and not to all consumers. Perhaps because even though the banking industry argues that this limited legislation was unnecessary because, though military personnel comprise a small percentage of all borrowers, lenders are nonetheless worrying outloud about potential "unintended consequences."

Another form of desperation lending is auto title lending. Boston Gal points to an article by Sue Kirchoff in USA Today which looks at the growing business:

Alicia and Clinton Lummus of Conyers, Ga., took out a $525 loan in March when injuries forced both to stop working. After paying $132 a month for eight months, Alicia Lummus, 30, told her lender she couldn't keep up and asked for an extension.

The lender repossessed the truck. Not only that, but the person who came for the truck drove it into a ditch and told the Lummuses they'd never get it back unless they helped pull it out, Lummus says. They did but are still trying to recover the $14,000 auto.

Also wondering why military protections weren't extended to all consumers, Kirchoff's article presents two decidedly different views:

"There's no consumer protection for working-poor people who struggle. … We just simply say, 'Tough, they're dumb,' " says state Sen. Joe Bolkcom, D-Iowa, sponsor of a bill to put a 21% annual interest cap on auto title lending in his state. "There's a huge amount of money that leaves Iowa in the form of these fees."

Iowa House Speaker Christopher Rants, a Republican, has fought Bolkcom's efforts, saying government should not act as Big Brother and take options from people who may have limited access to credit.

"They're not trying to regulate them. They're trying to put them out of business," Rants says. "If you start deciding how much interest somebody is going to charge, where do you stop? I'd like a better rate on my home mortgage."

Speaking of mortgages, another (sub)prime area of predatory lending is in mortgages. The Center for Responsible Lending is concerned:

Predatory mortgage lending drains wealth from families, destroys the benefits of homeownership, and often leads to foreclosure. The Center for Responsible Lending estimates that predatory mortgage lending costs Americans more than $9.1 billion each year. CRL is working with policy makers, civil rights leaders, and consumer advocates to support public policies that will provide meaningful protection against predatory mortgage lending practices.

Most abusive lending takes place in the subprime market, targeting people with weak or blemished credit records. A typical predatory mortgage is a refinance of an existing loan that is packed with excessive or unnecessary fees and provides no tangible benefit to the borrower. Unfortunately, many of these loans are perfectly legal, and too often they are targeted at some of our most vulnerable citizens.

The problem is extensive enough that several government agencies have warning articles including The Department of Housing and Urban Development (HUD) and The Federal Reserve Board.

The best way to protect yourself against getting into deeper debt and trouble with these loans is to educate yourself and understand your options and rights.