Payday Loan Regulations
Unreasonable Payday Loan Regulations: a Bad Idea.
Having worked on the front lines of my own payday loan store, I can unequivocally say payday loans offer a valuable service for the majority of consumers who use them to solve their financial problems; IF THEY ARE SMART ABOUT IT.
Let me say at the start, reasonable payday loan regulations are a necessity. Just like regulations governing my food, health, car, security… are requirements in today’s society.
The age old refrain by myself and my payday loan lender peers is, “Payday loans provide a valuable resource to people who don’t have other loans or credit available to them.”
Several studies have pointed out that 65% of households can’t get their hands on $1000 in a pinch. We are not talking about the unemployed, down on their luck, stereotypical low-income consumer. These studies refer to average “Joe’s with average jobs.”
“A majority, or 64%, of Americans don’t have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC.”
“36% said they would tap their rainy day funds for an emergency. The rest of the 2,700 people polled said that they would have to go to other extremes to cover an unexpected expense, such as borrowing money or taking out a cash advance on a credit card.”
This is not B.S. I know this because, once again, I am a payday loan lender! It’s my money I’m lending. I don’t have some hedge-fund or venture capital fund giving me money to loan to the financially strapped.
I hear my customer’s stories EVERY DAY. As they tell me over and over again, Sh%^^&T happens! They need cash to fix the car, buy groceries, pay for a perscription…
If the regulators put a stop to payday lenders, it’s not going to be good. For anyone! Where will a consumer in need of a car repair to keep their job go? Let’s hope they don’t get too desperate…
Credit cards? They’re maxed out.
Savings account? No way.
Get a small $1000 bank loan? Not a chance.
Their local loan shark? Not a good idea. Better to get a bunch of phone calls and texts from your local payday loan lender than a visit to your door from your local loan shark.
Sure! Payday loans are “expensive.” But these are high-risk borrowers we’re talking about. The costs to make a small dollar loan are very high. Payday lenders must pay rent, employees, phones, computers, loan management software, customer acquisition costs, bank fees, taxes, and on and on…
It’s more expensive to make small dollar loans. Lower interest rates rammed down the throats of borrowers and payday lenders will destroy the industry and hurt consumers. One less choice for solving their financial challenge. Not a smart thing to do.
A 20% APR on a two-week, $100 payday loan would only generate 76 cents of interest; doesn’t match the cost to process the loan!
Payday loan regulations stifle competition.
The financial services industry is already undergoing tremendous upheaval. Just take a look at the peer-2-peer lenders, the Lending Clubs and Prosper’s of the world. Rather than crazy low 36% APR rate caps, allow tech savvy entrepreneurs figure out how to loan money cheaper. It’s already happening!
Finally, since when has big brother demonstrated their ability to figure out what’s best for all of us. Why should some schlep in D.C tell any of us when we can borrow money? They have no clue what’s happening in our daily lives.
My customers are over 21. They don’t want to ask mommy if they can borrow a few bucks until their next paycheck.
Don’t get me wrong! Regulations play an importanat role in our society. There’s always some idiot in every industry who takes advantage or is simply too greedy for their own good. But “REASONABLE REGULATIONS must be developed and implemented.
And yes, admittedly, “REASONABLE” is in the eye of the beholder.