Oliver Hummel from Billings, Montana has schizophrenia. He receives a monthly benefit cheque of 1013 dollars. Last year car repair costs coincided with a veterinary bill for his 13 year old terrier; an unfortunate synchronicity that had Hummel stepping into a "pay day loans" office. He borrowed 200 dollars to meet the shortfall but soon realised that an extortionate interest rate meant he could not pay it off. Like many other vulnerable people in the United States Hummel borrowed more money to bridge the gap and within the year he had no less than eight credit sharks circling him. They charged interest between 180 and 406%.

The pay day loans sector is growing quickly in the States. Credit is granted quickly upon the security of a monthly pay or benefit cheque and interest is charged at a consistently high rate. American legislation may forbid direct payments from social services to lenders but these have found a loophole in the rules. These loan providers often work with banks and it is the banks that transfer borrowers' money to loan companies.

The end result of this is that the loan companies have almost complete control over the incomes of their "customers". Tommy Moore, the Vice President of the Community Financial Services Association of America (which represents around 60% of lenders stateside) defends the pay day loan model: "This industry promises easy access to ready cash. It wouldn't be right to discriminate against low earners who wanted to borrow money".

But critics maintain that the industry profits handsomely from those elderly or unwell people(like Oliver Hummel) who are receiving a guaranteed but low income. This means they can never pay back a Kredit quickly and ensures that the lender reaps huge returns on the initial loan through those high interest rates. These people are trapped by circumstance and it is not as if they are in a position to work overtime to level the debt. Mercifully the more tightly regulated German Kredit sector does not permit the kind of operation outlined here. Nevertheless, there are sharks out there so when applying for an online Kredit it is best to use a reputable online portal to gain an overview of the markets best value (and kosher) providers. 05.03.2008

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