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John Oliver takes on payday lending

By Jeanine Skowronski · Bankrate.com
Monday, August 11, 2014
Posted: 4 pm ET

Payday lending just got one more high-profile opponent.

On the latest episode of "Last Week Tonight," comedian John Oliver skewered the payday loan industry for trapping consumers in an endless cycle of debt.

"It's when you start missing payments that you're susceptible not just to frightening levels of interest, but also to fees you may have not been aware of," Oliver says in the video posted above. "It is not often that a metaphorical slippery slope costs as much as ski vacation."

He cites a training manual diagram outlining this cycle of debt from ACE Cash Express, which was fined $10 million for the use of illegal debt collection practices by the Consumer Financial Protection Bureau in July. Oliver also criticizes the industry for finding ways to circumvent regulation.

The segment ends with a (NSFW) bit from fellow comedian Sarah Silverman that urges consumers considering payday loans to do "anything else."

"If you're thinking of getting a payday loan, just simply pick up the phone, and then put it down again and do literally anything else," she says.

All jokes aside, there is evidence to suggest that payday loans should only be used by consumers as a last resort. An April 2013 study from the CFPB found the interest rates on these products tend to be high, with annual percentage rates averaging 339 percent.

A subsequent April 2014 report from the bureau found 80 percent of payday loans are rolled over or followed by another loan within 14 days.

As such, those in need of short-term credit should consider all options before taking out a payday loan. These include credit union loans, small bank loans, credit counseling or, even, borrowing from friends or family.

You can also visit the CFPB's explainer of payday loans to make sure you understand the ins and outs of these products before getting one.

Follow me on Twitter: @JeanineSko.

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