Time to rein in payday loans
Monday’s Post and Courier carries an editorial calling for the state to crack down on predatory lenders, to which I couldn’t agree more.
Predatory lending rides on state laws which allow virtually unlimited finance charges upon short-term loans without collateral. They offer a variety of services to get their money, including:
Predatory lending practices upon employees in the construction industry are no small deal. The money lost to payday loans, where finance charges can match, and even exceed, the amount borrowed, has a real impact upon the standard of living of employees. Some of those suffering the worst seek raises to offset their borrowing costs, or seek new jobs which pay more money, but are beyond their abilities, and they soon find themselves unemployed.
While some of the information is probably a bit over the top, such as Julian Bond’s claim that payday loans drag middle class people into poverty, the proliferation of predatory lending practices are of real concern. Many states have worked to rein in this practice. The Department of Defense is pushing for action to protect military families. South Carolina should not miss this call to action.
Predatory lending rides on state laws which allow virtually unlimited finance charges upon short-term loans without collateral. They offer a variety of services to get their money, including:
- Pawn shops
- Check advance/ “Pay Day” loans
- Title loans
- “Rapid” tax refund services
Predatory lending practices upon employees in the construction industry are no small deal. The money lost to payday loans, where finance charges can match, and even exceed, the amount borrowed, has a real impact upon the standard of living of employees. Some of those suffering the worst seek raises to offset their borrowing costs, or seek new jobs which pay more money, but are beyond their abilities, and they soon find themselves unemployed.
While some of the information is probably a bit over the top, such as Julian Bond’s claim that payday loans drag middle class people into poverty, the proliferation of predatory lending practices are of real concern. Many states have worked to rein in this practice. The Department of Defense is pushing for action to protect military families. South Carolina should not miss this call to action.
The other side of the equation is driven by the root of evil, the love of money. Legislating protections is only a short term fix, economic education from teh bottom up may be the long term solution, though we've had the example from Japan of 100 year morgages...
They always go after the weakest of the herd.
Don't get me started on the State approved Lottery. Your government in action.
I design, edit and publish the company's quarterly newsletters and monthly bulletins. I try to put "educational" material in every issue, targeted at health, safety and finance topics.
The cost of payday loans for some families can far exceed annual raises, so by helping educate them to better manage their money, as well as decisions regarding debt and credit, it's like giving them a second and even third raise a year, without costing the company a penny.
Makes me sound like a bleeding-heart commie lib, doesn't it?
First, is there a market for this kind of lender?
Second, can the people who are borrowing get loans from other sources?
As long as there is no fraud, let the markets work. These loans are high risk for the lenders. The repayment rates are dismal. That is why you have higher interest rates on the loans.
I spent a lot on credit over the Christmas season. But, that is not Bank of America's fault. Indeed, they gave the line of credit. Sure, the pay day folks are not Bank of America. But, if I don't pay Bank of America back, they will raise my interest rates, take collection activity, as they should. I made a deal with them to borrow x amount of money and pay them back in a certain fashion. You don't see people screaming about getting rid of credit card companies just because, gasp, we have to pay back what we borrowed plus interest.
I just don't the problem. Let the market work.
today, i posed a basic finance question to a co-worker - a loan where $10 was charged for every $100 for a thirty day period of time. what annual interest rate for that loan?
she said "10 perecent" and was stunned when i said 120 percent. you can bet that's not shared when they take out the loan.
in a perfect marketplace, i would have no problem with charging whatever they want. but that is not what is happening here.
since its not, i don't have a problem with putting some controls in place. granted those who have such financial short-sightedness will not likely become instant millionaries, but it would stop one of the most unscrupulous forms of exploitation of the poor of thise state.
If you want to that, why not go after used car salesmen, attorneys, doctors, and so many others that "take advantage" of people in their most vunerable times.
Either one believes in the free market or he does not. I personally worry about the free market in health care more than any other place. When my father was figthing for his life, and I was given some papers to sign to accept financial responsibility, I was in no position to make a reasonable economic choice. I signed the papers, believing that if I did not, my father would not get top care. And, I am a lawyer! (Speaking of lawyers, how many of of my brothers at the bar take a third of the settlements people would normally get because people come to their office as a result of clever commercials?)
Someone signing some papers to finance a tv or finance a drinking binge just does not get my sympathy.
If you want to have economic justice, you have to start with things that really have no tangible market value, such as the health or life of one or one's loved ones. The pay day lenders are nothing compared to what health care folks do.
It brings to mind a recent offering in the comic strip 9 Chickweed Lane, where one of the characters is returning to part time teaching in a university, they're going through first day of class Q&A and one student asks the Prof's philosophy on grading, this evolves into, "I suspect that you're asking if I think that you're entitled to a grade, and yes, you're entitled to an F."
Implicit in the bill of rights is that entitlement. We're entitled to fail. Thomas Edison, Abraham Lincoln, Henry Ford, Babe Ruth, Orville Redenbacher; all better known for their successes, bear far more failures on which their sucesses are built.
Anon, yes, there is a market, just as there is a market for cocaine, kiddy porn and popcorn. Because there is a market doesn't mean the market deserves to be nurtured.