The System Of Exploiting Financial Distress For Profit

Perhaps one of the most controversial financial practices is the pay day loans system followed in the United States of America.  The system has been cause of many fiercely fought legal battles in the country. 

This type of cash advance loans is often criticized on the ground that they exploit the financial stringency faced by people for the sake of profit.  Lenders make the borrowers their target.  Critics of the system abhor the method of solving financial problem through instant loans on the basis of the high interest rates attached to it.  They also feel that the borrowers, especially those who come from the low and medium income groups, may fall into a debt cycle due to such process. They have to regularly renew their loans and have to pay additional fees every time if they fail to repay the loans in time. 

Another criticism against the instant payday loan is that the practices of collection of the loan by the lender are highly aggressive. Though as per law the lender can only resort to standard industrial collection practices, they often resort to unfair means of collection. 

Defenders of the system often refer to low fee payday loan and point out that the short duration of the loan repayment period does not permit lower interest rates. The processing costs are also much lower than the processing costs for the regular loans.