Love 'em or leave'em, a lobbyist "for an Arizona payday-loan industry group", Lee Miller, made a very insightful comment about the push for banning payday loan establishments. "A ban assumes consumers are idiots and don't know what they're doing," Miller said. "Since when is removing choice a good thing?'' It is an interesting point. Cash advance places do post their rates prominently in their businesses. They hand over paperwork to everyone who signs an agreement informing you of your rights as a borrower. They notify you of your right to change your mind and return that money, without penalty, by the end of the day. They actually tell you, though it is printed on the contract, what your percentage rate is, in both percentage and dollar amount. Yet, many in America are acting as if this were the new prohibition, calling for the end of payday loan businesses.
Yes, cash loans are a business. Why should this shock anyone? Businesses are in business to make a profit. This is not earth shattering either. What is it about such establishments that has caused for such a public outcry for reform? No one requires that customers flock to the establishments. No one forces people to do business with payday loans. It seems the public demand for censure of payday loans is a convenient focal point for misguided direction that would best be leveled against the factors that have given rise to the necessity for this fringe market.
Opponents of payday loan markets seem incensed at the high rates these businesses are charging. These loan establishments often charge outrageous fees, typically $17.50 per $100 borrowed. Interest rate wise, a $500 loan over the period of a year would cost the average consumer $2612. While the high rates are a valid issue, it speaks to another issue. Why is it that consumers feel this is their only viable option? It does raise questions as to the intelligence or the desperation of the consumer who feels usury is his only available hope.
Proponents, while self serving, raise equally valid points. Consumers do have options, as they have the option not to frequent these establishments. Further, cash advance markets, perhaps in response to recent public outcry, have taken it upon themselves to educate the public, often displaying information about credit counseling and warning their clientele not to turn to payday loans to resolve larger financial issues. Several payday loan merchants have even gone so far as to list resources for consumers prominently on their websites. Advance America, for example, offers a tab of resources for financial tips, providing not only information, but a variety of budgeting tools offered to help the consumer.
It does make sense that these loan establishments clean up their image considering the public sees them as an evil. Perhaps, instead of finger pointing, opponents keep in mind that without a buyer, there would be no seller. If there is a fringe market for such industries as payday loans, it is because we have created the market and we cannot fault those who have taken the opportunity to fill a void.
Associated Press (May 14th, 2007). Proposed ballot measure would ban payday loans in Arizona - http://www.ktar.com/?nid=6&sid=480759
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