Category: report

  • Study: Payday loan users say they have no other options

    How do consumers win, if the legislature gets rid of all the competition? Everyone wants banks to offer payday loans. Some do, but most stay away from it b/c of the stigma and they can’t charge what they need to.

    This Kentucky study is basically saying that people that use payday loans do NOT have any other options. Once again, supply and demand collide.

    This study is not pro payday lender, but there are some good facts.

    A survey of low-income families in nine Kentucky counties showed that many turned to payday lenders because they couldn’t access traditional loans or other banking services.

    You can read the full article at mcclatchydc.com.

  • Finally, an independant and reputable payday loan report.

    This is an older post that’s been updated:
    “Instead of regulating prices charged on small, short-term loans, the authors argue that increasing competition will drive prices down” says Signe-Mary McKernan and Caroline Ratcliffe. This new report by the Urban Institute finds that if payday advances are eliminated they “could be replaced by alternatives that make families even worse off.”

    Now, guess who funded this report? They’re not payday lenders. This study was financed by the Charles Stewart Mott Foundation. I think it took a lot of guts. This foundation is committed to supporting projects that promote a just, equitable and sustainable society, since 1926.

    Nobody claims that a payday loan is THE solution, but it can be A solution for some people. This is about choice. This report is saying, don’t get rid of it; lets just get it right.

    Just like no one likes negative loan amortizations or $4 gallon of gas. Imagine if the government stopped selling us fuel when the price goes over $4? It’s just not the solution and neither is making payday loans unprofitable or making them go away.

    Consumer groups should just face the big, pink elephant in the room. There is a huge credit gap in our financial systems. They need to work to fill it and not eliminate it.

    These consumer groups should be empowering peoople, not treating them like children.

    Here is the full report. Please send it to your legislators.

  • Everyone is blaming payday loans

    “Payday loan customers who are approved on their first application are more
    likely to file for bankruptcy than those whose initial applications are denied,
    according to a study out of Vanderbilt Law School.”

    This article title “Payday loans create bankruptcy danger” places an interesting spin on things. What it proves is that payday lenders will just not give a loan to anybody.

    I also believe that this finding is purely incidental. Most of these people would have filed bankruptcy anyway b/c of the combination of credit cards and negative savings.

    To further discredit this study, many people do not have enough debt to file for bankruptcy. People who are denied a payday loan sometimes do not make enough money to qualify.

    Bankruptcy has 100% to do with personal responsibility and not payday loans. If you want to blame payday loans you should also blame: consumerism, credit cards, low wages and my dog.

    The problem today is that it’s part of the credit system and the intellectuals of the world just want to point the finger and scapegoat this community.

  • What is Predatory Lending

    Predatory lending is a vague term. I think this is a very good assessment and opinion by J. R. Clark Ph.D., University of Tennessee Chattanooga. He thinks:

    “Predatory loans, on the other hand, are loans obtained by the lender through deception or fraud, and do not enhance the welfare of borrowers. It is a disservice to the public to confuse loans which are truly predatory with those that are simply expensive.”

    He further writes that capping interest rates or that usury ceilings hurt low-income families most and that it just locks out the bottom of the credit pool or the poorest and worst off people. Here is the full article.

    I don’t think anyone expects people to “like” payday lending, but it’s an option. If there was a better option out there, people would be using it.

  • An Econoist’s View of the Payday Loan Industry

    “As we are becoming increasingly aware at both the national and the local level, credit markets cannot and will not work effectively and efficiently unless both lenders and borrowers, creditors and debtors, are permitted to experience the consequences of their credit decisions, for good or ill.”

    Tom Lehman, Ph.D., Associate Professor, Indiana Wesleyan University

    See the full report here.
    _

  • Payday Lending Has An Image Problem

    We attended the CFSA meeting in Las Vegas this past year. One of the initiatives was the ability to put together statistical reports that support the availability of payday loans.

    I found this article because I subsribed to the PaydayLoanIndustry.com newsletter.

    Donald Rieck just put out an article, “Predatory Reporting? On Payday Lending“. It’s basically saying that in states where payday lending was eliminated, over draft fees have shot up and filled the income gap left by payday lending. Someone is still making money out there at triple digit APRs and consumers have less choices now.

    In a report issued by Moebs Services, they estimate overdraft protection fees can account for up to 60% of net operating income for a credit union.

    I think the point is that if you’re going to allow over draft fees, why not give the consumer a choice to get a cash advance from a payday lender if they choose. The reality is that overdraft fees are forced on the consumer and a payday loan is a choice. Let’s be adults about this.