Category: Legislation

  • Taking a different angle on payday loans

    Ray Fishman writes a thought provoking article in Slate Magazine about the psychology of payday loans titled “400 Percent APR—Is That Good?“

    What I like about the article is that it approaches payday loan abuse from the correct angle. Basically, he says that most people using payday loans do not understand the true cost of the transaction and the the APR actually is not a good metric.

    I know this isn’t going to be popular, but I want to see this industry continue. Quoting a payday loan as a daily rate $2.35 per day, is a bad idea. Trying to make an expensive product look inexpensive is why most people turn off when the industry talks.

    Payday loans are expensive because many people do not pay. The people that pay have to cover the losses for the people that don’t pay. This is why 36% does not work. Every lender would go out of business.

    Legislators, instead of limiting rollovers, should demand another, more practical, method of disclosure. Create an schedule for a loan that is rolled over 3 times and show the nominal cost of the loan.

    Anyone that’s been successful in this industry knows that if the borrower needs the money, they’re going to take it. Maybe this type of disclosure could be used to build credibility for the industry.

    As far as I’m concerned, providing clearer disclosure will win over the people that are on the fence with payday loans. That’s what the payday lending side needs to do. Get people that don’t care, to care; and be on our side.

  • Payday Loan Reform Back in Illinois News

    Republican Joan Krupa has nine days left in her term. She was beat by Democrat Aaron Schock in this year’s election. Ms. Krupa has introduced one single bill that has no chance of advancing. The bill wants to cap payday loan rates at 36%.

    Considering the fact that she will be out of Illinois politics in nine days, she would have more luck starting herself on fire than getting anyone to notice a self serving bill from someone on their way out.

    I think payday lenders in Illinios are safe for now. I don’t know if anyone’s paying attention, but their trying to impeach some guy named Rod Blagojevich.

  • Were the Ohio and Arizona payday campaigns too deceptive?

    The question posed in this article: “Why do political consultants so often choose a deceptive argument when an honest one would do just as well?”

    Of course, hindsight is always 20/20, but there is something to be said about fanning the flames. You can’t say the campaign failed from a lack of effort. The PDL industry should be commended for their diligence, but they were beaten easily in both states.

    I’ve always felt that if the industry just told the public that the majority of the people that use the product do NOT want to see it go. I would love to get out of paying my electric, gas or telephone bill; but it doesn’t mean I don’t want electricity.

    One instance that I think was sketchy was the commercial starring the older, farmer with the red pick up bitching about the government. I concede that there is a personal freedom argument here, but getting all libertarian on the general public just doesn’t work that well.

    I’ve always felt the power of the industry lies in the numbers. By presenting the shear number of loans, you can make a argument that it’s a very desirable product. The numbers do not lie.

    One could also make the argument that it doesn’t trap people into a cycle of debt because borrwers are fully aware of how the product works.

    Once you try to hard to sell something, as they did in Ohio and Arizon, it can confuse the general public. I think “choice” was a big part of the campaign and that’s a good thing.

    Again, I don’t mean to sound like the Monday morning quarterback or placing blame.

  • The true origins of the word “usury”

    Usury was originally a biblical term. This makes it a very powerful word for many people. The Jews coined the word usury and it meant lending money at any rate of interest to another Jew was condemned, but you could lend money to outsiders.

    This term being associated the bible is influencing people that are “on the fence” so to speak about payday lending. People need to stop interpretting the Bible incorrectly b/c it’s very powerful.

    Here is the full article by Marc Kilmer titled ‘Usury’ misused in lending debate . Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus.

  • Illinois Pols Receive More From Payday Lenders Than Any Other State

    Why do people autoatically assume that this is a bad thing? Providing campaign contributions is a good thing. There isn’t a single effetive organization out there that doesn’t donate to campaign funds. The industry is operating in good faith above the table.

    It looks like Illinois’ lenders are pretty organized compared with other states. Payday lending is a complicated issue. Many people need short term capital. It’s important to try and get it right for both sides. No one is against regulation, just make it reasonable.

    Here is the article.

  • Canada’s working with lenders

    Cananda is systematically placing caps on payday loans. The average cap is around 25%, which in my opinion is pretty reasonable for the lender.

    Nova Scotia is in the process of setting a cap and British Columbia will probably be next. Manitoba recently set it’s cap at 17%.

    Apparently, payday lending is a billion dollar industry in Canada.

    Stan Keyes, president of the Ontario-based Canadian Payday Loan Association, said he’s hopeful Victoria will come up with a cap that is fair to both consumers and the industry.

  • Payday Lenders Get on the Arizona Ballot

    Arizonans for Financial Reform received its qualifying notice Friday. In order to make it onto the ballot, they needed 153,365 signatures.

    The payday loan industry is trying to remove a drop dead date of 2010 for payday loan reform.

    I guess it’s in the voters hands now. I wonder how it will display on the ballot? Nobody likes it when you take away their options.