“Legislators and activist groups are using the economic crisis as cover to build an ever-increasing safety net that rewards reckless behavior at the expense of responsible consumers”
I agree with Tim. The government is putting training wheels on voting adults. Not good.
You can read the full article in the Sun Sentinel.
One week Senator Dodd is raised more than $44,000 from pawnshop owners and payday lenders. The next week, he joins Senator Durbin on the “holier than thou” bandwagon and supports a bill that’s trying to cap rates at 36% across the board.
This does not make any sense. I can see two scenarios:
There is a bill before the Senate judiciary committee that would make it harder to collect on high risk loans, among them are payday loans.
The bill would limit creditors from collecting on high-interest rate loans in bankruptcy court and may give consumers leverage to negotiate better terms.
I don’t think this is a bad thing for a couple of reasons:
Let’s face it, there are a lot of loans that never get paid, expecially on the Internet.
You can read more about this article in Bloomberg.
Rep. Luis Gutierrez will likely bring his Payday Loan Reform Act of 2009 up for a committee vote this session. This bill his getting a lot of heat from both lenders and consumer groups.
Personally, if the industry can get a favorable law, they should jump on it. Rate caps scare me.
“Overdraft charges bring in big-time revenue for banks and represent one of the biggest slices of the short-term unsecured credit market — bigger than credit card over-the-limit penalties and much bigger than payday loans. Indeed, overdraft penalties are short-term loans, and they can be even costlier than their payday cousins.”
“Michael Flores, CEO of Bretton Woods, a consulting firm that works for both payday lenders and banks, estimates that overdraft fees brough in $34.7 billion in revenue for banks and credit unions in 2008, compared with $7.3 billion for payday lenders.”
These quotes were pulled out of the Huffington Post. Bank over draft fees are a big reason payday loans are in such high demand. Just on the Internet, payday loans and related keywords was searched over 750,000 times according to Google. If we factor in Yahoo and MSN it’s probably over 1,000,000 searches. This is just the Internet. Let’s not forget the brick and mortar operations.
Consumer groups are constantly attacking payday loans, but they never address the demand side of short term cash. These groups think they’re helping people, but their doing two things to hurt them:
If you want to read reports on the validity of payday lending, you can view them here on PDL Industry.
Ok. Let’s get past the bullshit title of this blog post in the Huffington Post.
Online payday lending is a completely different ball game. Most of the websites are lead generation companies. OLA has to become more transparent, if they want to be effective. I’m sure lenders do not want to advertise this way b/c it puts a big bull’s eye on their foreheads and makes them open to class action lawsuits.
See this post about an Internet lender that settled a law suit in Wisconsin and what Nevada is doing about it here: http://pdlindustry.blogspot.com/2009/02/internet-lender-hit-with-60k-class.html and http://pdlindustry.blogspot.com/2009/02/nevada-intenet-lenders-under-fire.html.
The reality is that there are a lot of off-shore internet lenders making a lot of money. They’re never going to stop, so you might as well allow payday loans here where we can regulate them. This issue is a lot like the offshore gambling.
The reality is that the product has a huge demand. The numbers do not lie. Regulate it but don’t put lenders out of business b/c people will just go to offshore companies for a loan. While their at it, why not encourage store fronts. These lenders are all licensed and more accountable.
If anyone has an idea to identify lenders that are licensed and regulated online, I’ll do it. I’ll even put them on my website.
Read the Article at HuffingtonPost
The Huffington Post is giving Senator Dodd for allowing the OLA (Online Lenders Alliance) for sponsoring a dinner. Now, did they actually sponsor the dinner? No. Why not?
The OLA are voters just like anyone else. Why can’t they get their story heard? This is just another chapter in the negative payday loan image saga.
I think people need to be completely upfront about payday loans. People talk out of both sides of their mouths. They think payday loans are bad, but these borrower’s friends and family do not want to lend them $500. The landlords, utility companies and car mechanics of the world secretly love payday loans.
Unfortunatly, many larger payday lenders have to get tough with collections b/c their getting screwed by class action attorneys and fighting laws that will put them out of business. Who pays for that? The borrower.
You can read the full article here: Dodd Dinner with Online Payday Lenders Transforms into Fundraiser.
Unfortunately, the people in office don’t know what it’s like to need $500 yesterday. Payday loans may hurt people that use them incorrectly, just like anything else in life. If you drink too much water you can die.
What solution do these legislators have for people in need of a car repair or a repo or overdraft? Without saying it, they’re slamming the door on borrowers.
We get it. You don’t like payday loans, but aren’t payday loans a solution for some people. Why would the goverment penalize the people that use it responsibly?
This article in the channel 5 news feels the same way.
I found this letter at Payday Pundit. It’s a plea to Rep. Guitierrez to not cap rates on payday loans. The letter is well written and consice.
Personally, I think Rep. Guitierrez is sticking his neck out on this issue. I believe he realizes that there is a need for a cash advance product. Payday loans are very polarized and most politicians are afraid to speak the truth.
Thanks to Payday Pundit for always providing the good stuff for our industry.
Spokeswoman Kathleen Day for the Center for Responsible Lending says “If you can’t make money on that (36%), you shouldn’t be in business.”
It’s like saying you can’t charge more than 1/30 of a month’s rent to get a one-night hotel room. If a studio apartment is $1000 per month, you can only charge $33 to rent a room for one night.
Consumer groups should spend less time acting as parents to voting adults and more time educating them. Better yet, why don’t they lend people $300 when they’re in a bind. They would rather just put people out of business.
Luis Guitierrez is currently sponsoring a law that would regulate payday loans at the federal level. We wrote about this a few weeks ago in a post titled: National Payday Perfect Storm Brewing. Unfortunately, neither side wants it; which means the industry will get to operate for a few more years until every state bans them.
You can read more in QC Politics.