NY Times Addresses Payday Loans

The New York Times bashed banks that help move money for off shore payday lenders.  The article is titled “Major Banks Aid in Payday Loans Banned by States”

The article itself is typical of most articles on payday lending.  It’s sensationalized and it selects a small sample as a baseline for judging the entire short-term loan industry.  Definitely worth the read because the New York Times is a big stage.

Here is where it fails, in my opinion:

• Most state laws are terribly written.  In many ways, they hurt the lender and the borrower.  Regulation is preventing better, more competitive products from entering the market.  
• It sites the ACH authorization as difficult to revoke.  My experience is if someone revokes an ACH authorization in writing, it will stick.
• Let’s be honest, everything can be bad or good depending on how you use it.
• Consumer groups are not embracing alternatives that may be better to a 522% payday loan.  They all take a super hard stance on anything over 36%.  This is not fair or realistic.

There is some good information in the article.  The industry is still growing.  There is a small shift from store-front to online borrowers.   OLA is right for pursuing a federal charter.  It’s impossible to deal with these states.  Too many conflict of interest there.

“While there are no exact measures of how many lenders have migrated online, roughly three million Americans obtained an Internet payday loan in 2010, according to a July report by the Pew Charitable Trusts. By 2016, Internet loans will make up roughly 60 percent of the total payday loans, up from about 35 percent in 2011, according to John Hecht, an analyst with the investment bank Stephens Inc. As of 2011, he said, the volume of online payday loans was $13 billion, up more than 120 percent from $5.8 billion in 2006.”

Now the Online Lenders Alliance, a trade group, is backing legislation that would grant a federal charter for payday lenders. In supporting the bill, Lisa McGreevy, the group’s chief executive, said: “A federal charter, as opposed to the current conflicting state regulatory schemes, will establish one clear set of rules for lenders to follow.”