Reading Questions 6.9 Reading Questions
1.
Do some research on payday lending laws in your state. Is payday lending legal? Are there laws restricting what interest rates that they can charge?
2.
One argument that people make about payday lending is that it offers a necessary service to people who cannot secure loans in other ways. What are some other ways that people could borrow money that aren't as predatory?
3.
One alternative to payday loans, originally popularized in India, is the microloan - low risk, low interest loans made to entrepreneurs with specific plans on how they plan to use the money. Do some research on the microloan industry. How do microloans differ from payday loans? Could they potentially be an alternative to payday loans in the United States?
4.
What action can we take to help rein in the predatory lending industry?
5.
In Islamic law, riba, which can mean interest or excessive interest, depedning on interpretation, is prohibited. Instead, a system called murabaha is used. Explain what murabaha is and how it differs from an interest-bearing loan. Do you think this system is more or less fair to borrowers? Is it more or less fair to lenders? Explain why you gave the answers that you did. Do you think this system could be a good alternative to payday loans? Why or why not?