Payday Loans Challenged by FTC Top Rankings
An FTC issued consumer alert on payday loans titled “Payday Loans = Costly Cash” enjoys the #1 spot on Google and Yahoo for the terms “payday loans“, “pay day loans” and “payday” (on Google). I’ve seen the FTC and the FDA advertising on Google AdSense in the past to counter questionable web services, but these listings are a major coup for the FTC’s consumer alert service to top all of the payday loan sites fighting for search engine spots with an organic listing (and better for the tax payers since SEO is a much more cost effective form of marketing than Paid Search if you can get the rankings). Plus, this helps fortify the theory that exclusive domains with .edu and .gov extensions get great play across search.
So, what does the FTC have to say about payday loans (this is for all of you keyword density maniacs)? Check cashers, finance companies and others are making small, short-term, high-rate loans that go by a variety of names: payday loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans. Under the Truth in Lending Act, the cost of payday loans – like other types of credit – must be disclosed. Among other information, you must receive, in writing, the finance charge (a dollar amount) and the annual percentage rate or APR (the cost of credit on a yearly basis).
A cash advance loan secured by a personal check – such as a payday loan – is very expensive credit. Let’s say you write a personal check for $115 to borrow $100 for up to 14 days. The check casher or payday lender agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend the loan for another two weeks. In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.
With the Christmas season coming around I hope that the #1 FTC ranking will help to influence some parents with alternatives to such high finance charges stemming from the payday and credit card world.