There’s a place for payday loan companies, which typically serve credit-challenged customers who can’t get conventional bank loans. But as Eagle reporter Deb Gruver’s articles on these flourishing operations showed, it’s easy for some Kansans to get caught in a vicious cycle of juggling multiple loans — sometimes as many as 15 at once.
That’s why it’s good that state Rep. Steve Brunk, R-Wichita, and other state lawmakers will look next session at revising payday loan regulations with an eye to limiting how many total loans a customer can have at one time.
This would ensure reasonable protections of consumers who are in an especially vulnerable financial spot.
Posted by Randy Scholfield
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176 Comments
Please government, save us from ourselves. Please.
How about limiting the usurious interest rates while you’re at it?
So, some people exhibit poor judgment, and all of us will have a law limiting how much or how often the rest of us can borrow? What is wrong with this picture?
This is a bad idea, lousy legislation, and smacks of ‘big brotherism’.
All of the of these posters are correct in my opinion. I am cutting and pasting a rant from my blog site on this subject.
Oh, and by the way, don’t think that the people owning these businesses are “mom & pop” pawn-shop type folk – Nope, these are big corporations behind this scandal.
Wednesday, December 21, 2005PayDay Lenders: A Very Serious Subject . . .
I want to express my appreciation to Deb Gruver for her two recent Eagle stories on the burgeoning growth of PayDay loan businesses in Wichita. In my view these stories have been long overdue. Each week my family and I drive at least once from our near-east side home to downtown and then back again. My children have invented a game whereby each of them attempts to collect instances of newly opened PayDay loan businesses, Cash-for-Car-title-Loan businesses, and etc. This game has been going on for several weeks and there are no indications that it will be over any time soon. Howard Karger in his book – ShortChanged: Life and Debt in the Fringe Economy (2005, p. 73) says “In fact, there are now more payday loan shops in America than McDonald’s restaurants.”
I want to be up front, I have a decided bias against these businesses and I have written my state representative expressing my concerns. I don’t believe that there is a viable “other side” to the story. In fact, it offends me when a purveyor of one of these “fringe economy” (read – “predatory lending”) businesses say that they are merely filling a market niche untouched by others. To me, this would be tantamount to Dr. Kevorkian saying that his assisted suicides offer patients an alternative to anesthesia. Sorry, the reasoning doesn’t make sense, and I don’t find it amusing.
As Ms. Gruver pointed out in her article, the annual percentage rate (APR) on PayDay loans can run in the 400% range. Advocates of this business practice say that their usual customers are professional, between 30 and 40 years of age, and making between $30,000 and $40,000 per year. The argument is that “these are not poor people, don’t feel sorry for them, because they are making maybe admittedly stupid choices by accepting such credit terms – they are none-the-less making free choices from a position of individual freedom”. Sounds pretty high-minded, doesn’t it?
The truth is, in today’s fringe economy, it is very easy for people making the amounts of money listed above to be “functionally poor” as described by Howard Karger in his book cited above. It is very easy for people making 30k to 40k per year to have such high debt and an absence of assets that the sum of their monthly and yearly income-to-debt ratio is a negative number. Hence, for all intents and purposes these people are poor. Provide a financial emergency, like a car breaking down, and these same people become desperate. Given sufficient desperation, anyone (and not just from greed) will turn to these predatory lenders.
I am a “live and let live” person, and I am troubled whenever government decides it must “take actions to protect people from themselves”. In Ms. Gruver’s article, Representative Brunk speaks of such protection. Instead of limiting how many PayDay loans a person can have, I would like to suggest a two-pronged alternative.
The first prong would involve, instead of passing laws that facilitate these businesses’ preying on people, how about the Kansas legislature passing a law that says the APR of any loan cannot exceed 30% in Kansas. It seems reasonable to me that anyone taking 30% APR on a loan can make enough money to stay in business. I believe that if our legislature had the courage to pass such a law, these predatory lenders would go scurrying to more hospitable environments and I would say “good riddance”.
This first prong would not be enough, however. Also Credit Unions and Savings & Loans should be encouraged to make convenient/accessible small loans with terms that would allow, say, a six month repayment plan. This second prong has been demonstrated to be effective, most notably in North Carolina. See the following link to the success story of the North Carolina Self-Help Credit Union – http://www.self-help.org/. It can be done a better way than it is now. It can be a win-win situation for the lender AND the borrower.
Ms. Gruver has helped us recognize the problem, let us not stop now. Let us not stop until we have resolved this problem. Our city will be a better place to live for EVERYBODY.
Thank you.Steven E.
See Deb Gruver’s articles with the following links:
http://www.kansas.com/mld/kansas/business/consumer/13431936.htm?template=contentModules/printstory.jsp
http://www.kansas.com/mld/kansas/business/consumer/13447081.htm?template=contentModules/printstory.jsp
I apologize for the length here. The WE folk will have to understand that providing the post they did for me, is like serving up something on Zionism for Ed.
Unfortunately, I have free-lance work calling me, so I won’t be able to respond much on this subject. I have bills to pay, but fortunately NOT TO PAYDAY Lenders. I urge taking a look at the book cited above.
Additional question on potential laws to limit the number of loans a person could get. How would that ever be enforced? Would there be a new state bureau of loan enforcement where every loan is registered?
Yes…people making a decent wage get into credit trouble..and who’s fault is that? The people with the credit cards! When is this country ever going to wake up and realize the old idea of personal responsibilty is NOT a bad thing??
Great post, Steven. You are right on. Corporations should be held more accountable for their predatory business practices. Just like the tabacco industry, the credit industry also needs to be regulated to minimize it’s victimization of desperate or vulnerable consumers. It’s the right thing to do.
My question is: Who are the people backing these predatory loan outfits? Is it a basically the same outfit using different names? Mob connected? Any law enforcement groups looking into the owners?
It seems to me that an honest, upright business wouldn’t touch something as insidious as these loan shark outfits. Only sleaze and scavengers would operate on the fringe these outfits operate on.
I like the idea of restricting loans to 30% interest. It would help drive the predators out of state, at least.
Ray and Joe, if you’re correct then why not just eliminate laws dealing with usury?
And are you arguing that loansharking is merely MSM “spin” wherein the victims are really the perpetrators?
I’d encourage everybody to learn about “the rule of 72.” (for those who know a little math, ln 2 = 0.7, approximately; the rule of 72 is actually the rule of 69, but this is somewhat pendantic).
http://www.google.com/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial_s&hl=en&q=%22the+rule+of+72%22+compound+interest&btnG=Google+Search
The magic behind the “magic of compounding interest” can become the demon of doubling principal much, much faster than reasonable humans can anticipate. Especially young humans with families to support.
And especially at Christmas. Yours is a Christian idea, Steven E., and one that I support.
You know! I see them popped up all over town. Big time. They advertise on TV, billboards, flashy LED outdoor screens and the like.
But everytime I drive by one, I take a look, and it seems like there is nobody there. So I don’t know who is getting these loans or if there are a bunch of people I’m not seeing.
Honestly I believe many payday loan opperations will go away, because there are too many for the compitition and market to handle. It was like wireless outfits in the late 1990’s. They were everywhere, now we don’t see all that many, except the mobile phone companies outlet stores themselves.
This is an interesting subject. One of the leaders in the Fringe economy is a business known as “ACE Cash Express” – this business expects its total revenue for fiscal 2005 to range between $265 million and $270 million.
Another big player in these businesses is a character brought to you by the Clinton administration, viz. William “Billy” Webster, Clinton’s former director of scheduling and advance. He is the CEO and cofounder of Advance America. In addition to charging exorbitant interest rates to working people, Advance America “partnered with nonprofits” in 2004 to “get out the vote”. They doubled their goal of signing 50K new voters because of the availability of voter-registration forms in their more than 2,000 Advance America locations in 29 states.
Who is backing these operations? Well off corporations and CEO thugs who are a step below your average criminal.
I am all in favor of individual responsibility — this is acutally one of the good messages of the Republican party. I just hope that they can see their way clear to extend the concept to “Corporate Responsibilty” — I am not holding my breath on that one, however.
I read in the NY Times this weekend where many Wall Street Banking firms are holding signicant percentages of the stock offerings of off-shore gambling casinos. These businesses are technically illegal in the United States. These business generate high profits, however. They are illegal in the U.S., unless, of course, you are a wealthy Corporate sponsor of these businesses.
This kind of stuff just makes me shake my head.
[the sources for the numbers above, is the book I cite in my original post]
should have been”on-line off-shore gambling casinos”
Steven E., I thought you were a “live and let live” person. But you propose to limit the economic freedom of individuals to manage their finances as they see fit. I understand that you believe these people are not handling their finances wisely. But imnposing your judgment of wise personal finance practice on them is not, I would submit, “live and let live.”
With regard to the encouragement of credit unions and other businesses to make loans that they currently don’t make, how exactly would we do that? I fear that any solution means subsidy, and that means less economic freedom for us who must pay the subsidy.
Laws governing predatory schemes practiced by some is not a bad thing. The US constitution speaks directly to such behavior from government and protecting those in our society with less fortunate financial management skills { without impeding legitimate business } should be a moral imperative. Nothing is lost by expanding laws governing fraud to include shysters.
Flike..
You missed my point entirely. The concept of the government telling us how many loans we can take out is abhorrent to me. What is next? The government telling us what kind of car we can ‘afford’?Those people who have overextended themselves were not forced to charge that stereo system, buy that new car or spend too much. Their abuse of credit is not a good excuse for the government to step in and tell the rest of us how much money we can or cannot borrow.
This has nothing to do with the rule of 78’s (which, check the laws, is illegal). Nor does it have with usury rates. My objection is to the government telling us all whether we can borrow money or not.
Of course we need more government intervention. People are too stupid to deal with their own finances. That’s why we NEED this legislation.
A little big brother is a good thing once you expand it.
Sorry to say, Galahad, but your thought of government taking care of use from cradle to grave has been tried. The former Soviet Union tried it for decades, and it didn’t work.
Socialism accomplishes nothing more than lower the standard of living for everyone. It destroys individual initiative. It creates a total welfare state. Look at the grand experiment of the Union of Soviet Socialist Republics.
No thanks, I do not want the government running my life, whether it is telling me how many loans I can have or where I will work.
I am not sure who to direct this response to, but let me clarify a few things.
First of all, there is considerable money in short term loans to people who have less than great credit. Why do you think there are 61 businesses of this sort in Wichita, KS. I think C.U.’s would be able to put together products that would be of interest to the folks who take out these PayDay loans. I think the C.U.’s can offer a cheaper loan in terms of the APR interest and a more reasonable payback scheme. They will be able make money; they will need to change how they do things and assume some risks.
I am suggesting limiting the ability of corporations to charge outlandish rates of interest. 400% APR is absurd. Yes I would like to limit the freedoms of these corporations in the same way I would like to limit the financial gain of those companies that profit at the expense of the environment via pollution.
I think the pollution metaphor is a good one for these PayDay lenders. These are lenders who strap people with high interest rates and that money is going toward wealthy corporations in other parts of the country. This money is not going toward the health of the economy here in Wichita – where it might otherwise if it was not going toward these predatory interest rates. PayDay lenders may not poison the environment, but they sap local economies of their vital resources.
PayDay borrowers, I am assuming declare bankruptcy at a greater rate than traditional borrowers. Who do you think ultimately pays for that? You and me in terms of court costs, higher interest rates, etc.
I know there are some people who have a free-market brain-freeze and to suggest regulation is heresy. I think the free market is a good solution for many problems. I don’t think the model works well for all problems, however — education and health care come to mind as obvious examples. I know I won’t change the mind of some free market zombies, but I think in time you will come to see the error of your ways on your own. I will pray for your soul in the meantime.
Thanks.
Payday loans stink at first sight, but it’s not like anybody is forcing people to use their services, it’s a choice. Granted, it’s a stupid choice, but how do you legislate away stupidity? People make bad choices all the time. Doing business with payday loan companies is just another stupid choice. I would imagine the default rate on these kind of loans is pretty high, hence the exorbant interest rates. We would do well to remember, people who get themselves in this kind of situation in the first place generally have a history of not paying what they owe. You don’t get good interest rates if you don’t have good credit.
People who use payday loan services made their own bed. Is it wrong to expect them to lie in it?
“Of course we need more government intervention. People are too stupid to deal with their own finances. That’s why we NEED this legislation.”
Okay, this is the REAL Galahad saying that I did not write that crap.
How do you know if the true Galahad has written something or whether it’s that troll “steve”?
Very simple, my friends: my posts are insightful and well written.
Unlike that this former post, typical of guy that sells his an orifice for anonymous sex with other men. That’s not me.
From now on, I’ll be posting UNDER ANOTHER NAME.
ANY FURTHER POSTS FROM GALAHAD WILL NOT BE FROM THIS GALAHAD.
Thanks for your patience.
The post-er formerly known as Galahad.
Normally, I wouldn’t dignify a charge like Galahad’s with a response, but it’s absolutely NOT true that I have anonymous sex with other men.
I usually ask them to buy me a drink first.
Hope that clears that up.
steve
Boys, can we please return to the subject? This is too important.
Well, the fact that they exist shows that common sense has lost–these free-market idiots have no problem with legalized usuary but would crap a gold brick if I wanted to be able to sell my kidney to the highest bidder, grow my own cannibas, or run a house of prostitution.
Some things should not be a matter of choice . . . stealing from desperate people who don’t understand the ramifications of high-interest loans is one of them.
You “rugged individualists” don’t get it–what do people do when they’re up against a wall and have nothing to lose? Is it going to be my or your car they try to steal? My or your home they break into? My or your wife that has her purse ripped off her shoulder etc. etc.?
I would suggest, Gail, that a “free-market idiot,” if they value free markets because of the connection between economic freedom and political freedom and personal liberty, would allow the things you list: “sell my kidney to the highest bidder, grow my own cannibas [sic], or run a house of prostitution.” I would allow you to do these things if you want, even though I wouldn’t recommend them for myself.
If someone doesn’t want to allow people to do things like these, I would not say that they believe in free markets. They probably believe in allowing people to do or not do the things they approve of. Based on which set of things they approve of, and which they would disallow, we often classify them as “liberals,” “moderates,” or “conservatives.” They all desire to control the behavior of others to fit what they think is proper.
It may be possible, Steven E., to distinguish between payday lenders and polluters. A person may not be able to avoid the destructive effects of pollution. Going to a payday lender, however, is a voluntary act.
To those who believe that using payday lenders leads to social costs such as bankruptcy or crime, there are many other things that lead to this too. I think that most people would not be in favor of laws banning all such activities.
The “let them eat cake” attitude of some of our more privileged { never been broke or know the desperation of what it’s like to be broke } posters is indicative of why Marie Antoinette got her head chopped-off during the French revolution. Thou that danger of the guillotine’s revenge is not present now, the callous remark about “it’s their choice” still bears out a pathetic ignorance deserving of such a fate.
I”m not sure if we need more government intervention. What I would like to see is the interest limited on these sort of loans.
I fell into this once when I was in college and didnt’ have the money to pay the car insurance. My income was closer to around 10k then. It would have been easy to fall into the cycle of getting another loan to pay for my last loan.It tooks months of shuffling my budget to recover from that one loan.
Just because a business fills a niche doesn’t mean it’s not preying on people.
wilson–you’ve really drunk the kool-aid, haven’t you?
Society outlaws certain activities such as drug use, prostitution, child molestation, vandalism, fraud, theft, arson, dui, etc. etc. not because they are moral prudes as you imply, but because those things are BAD FOR SOCIETY.
Why you think an individual can thrive in a society that tolerates sociopathic behavior, I don’t know, except you seem to value your concept of “freedom” more than you value actual quality of life.
Using your standards, the finest place on earth to live would be Baghdad, Iraq. They have no government, so they have no law enforcement. Complete and total “freedom” means complete and total chaos.
Oh, the beauty of free-market solutions to every conceivable human problem. Adoption of such a position does free one up from thinking — that must be part of the appeal.
The truth is PayDay lenders do fulfill a lending niche. I think this niche needs to be addressed and is the reason I included it as part of my solution up-thread.
Credit Unions who may start extending lending services to PayDay borrowers will need to start dealing with people they don’t usually do business with. People for whom English is definitely a second language, people who may not smell so good, people who distrust banks, people who are used to being victims of various forms of fraud as a way of life.
It is interesting to me as some of the above posters allude, conservative Republicans are moral and ethical on every single subject except money – then “anything goes”. (Well, I guess they are not so libertarian on what a woman can do with her own body – are they?). I am clear that I disagree with free-market zombies on what should be controlled or not.
It is a common practice that employees who work for PayDay lenders have to sign an agreement to not talk about the business to outsiders as a condition of employment. I wonder what it is that they are wanting to hide? Do you suppose they wish to hide the fact that they are such paragons of free-market enterprise??? Or, maybe they are wanting to hide something else??? As Arsenio used to say, makes ya go “Hmmmm….”
The lobbyist, who helped change Kansas law which now allows these businesses to charge nearly 400% APR lobbies for other economic- health-enhancing businesses, i.e. Indian casinos.
Regardless, I am pretty sure that the Kansas legislature will not have the guts to limit the amount of profiteering PayDay lenders can perpetrate. Given that, I would be willing to settle for the second part of my plan — figuring out ways to get traditional lenders to serve these non-traditonal borrowers. It has been done in other places. I completely disagree that the status quo is okay.
Thank you for listening in.
I’m really glad that wilson tells me what to think. I wouldn’t have any idea otherwise.
Several of you have stated that borrowing from payday loan operations is a voluntary act. In the strictest sense, yeah it is, but many of the people who borrow from them are the ones whose rent and gas bills have risen much faster than their wages, and who have no other resources left when their 20 year-old car breaks down, or a bill collector is harassing them. These people need another viable alternative before you can call it a voluntary choice.A business that preys on poor people is no business, it’s organized crime, and should be prosecuted as such. 400% interest is not business, it’s storefront loansharking!
I used to think that this blog was a viable alternative to sending letters to the editor, etc. One could get pretty quick feedback from different and like-minded people; this was but one of the advantages.
However, there are so many people posting here under other people’s names (and addresses, etc.) that it occurs to me that this might be a pretty great waste of time. You could say I am slow in waking up and smelling the coffee.
Any way . . . children, enjoy yourselves.
Steven E.,Don’t leave- we need to fight the trolls who want to silence free thought.Also, re. your earlier post, the difference between liberals and conservative is that to liberals, money is immoral and sex is not. To conservatives, sex is immoral and money is not.
It’d be a serious loss for all of us, Steven. And, crappy security aside, this is one of the better groups I’ve run across.
I’m pretty busy at present, and I’m a bit late getting back here, so I’m not going to jump in on this subject.
Very sorry to see this result, (former) Galahad. Don’t let on when you assume your new identity; most of us will recognize you soon enough.
I suspect the last message from “steve” (no, it wasn’t me!) was to point out that wilson is none@none.com, while steve is Steve@Steve.com. Coincidence? I don’t know. But I’d rather have wilson’s opinion than steve’s trolling any day.
If we get any more of this crap, I would suggest complaining to the webmaster. Granted, they’re powerless to stop trolls, and they have to determine which IP belonged to which poster, but they could (probably) pass the complaint on to the troll’s ISP.
Sorry for the long OT post. I now return you to your regularly scheduled program.
Rage & Jed,
Thanks for your comments. The subject of this thread is a serious one to me. I am having a hard time figuring out why I’m taking this one so personally. This subject is something that I need to do more than blog about –I have not figured out what all that means, however.
I should say that some of my “un-niceness” prevents me from legitimately casting the first stone on troll subject. Having said that, the recent spate of trollishness has been especially bothersome to me. It diminishes all of our experiences.
I think due to other time demands, I have less patience than usual. I will be coming back from time to time in the short term, and hopefully more later on.
Thanks again. Apologies for this off-topic digression.
Actually, Rage & Steven et al.,
The editors could stop trolldom in its tracks by 1. banning isp addresses, 2. requiring users to register.
I post on a number of websites that do both.
It’s not that hard; the Eagle just doesn’t have the will to do it.
Meanwhile, as one who has had to take it for a long time, I plan on dishing a little out . . .
Testing 1-2-3 (technical problems?)
Okay, this will be the third time I’ve attempted to post this.**********************************Webmaster,This is concerning a troll (I know, I know, there’s little you can do–hear me out).
Several few days ago, someone named “steve,” listing email as “Steve@Steve.com” starting using a bot to harrass the poster know as “Galahad.” Galahad started making small changes in his sig, but the troll followed. See these:
http://blogs.kansas.com/weblog/2005/12/fisa_judges_wan.html#comments (Message #69)
http://blogs.kansas.com/weblog/2005/12/cal_says_give_m.html#comments (Message #12)
http://blogs.kansas.com/weblog/2005/12/boy_thats_a_leg.html#comments (Message #42)
http://blogs.kansas.com/weblog/2005/12/be_careful_the_.html#comments (Messages #26 & #58)
Finally, someone (probably “steve”) posted a false message under Galahad’s sig:http://blogs.kansas.com/weblog/2005/12/limits_on_payda.html#comments (Message #15)
What do I want? If can you tie to the IP to a ISP, pass the complaint on. That’s all. If if helps, I posted the message from “DorkWithNoLife”, just following one of steve’s, and my backbone provider is ******.***:
http://blogs.kansas.com/weblog/2005/12/fisa_judges_wan.html#comments (Message #70).
We may have a lost a regular over this, and another is talking about leaving. Please do what you can.
Thanks,**** ****
Guys, DON’T GIVE IN TO A TROLL! If we give in to this little peckerwood, he thinks he’s winning. Galahad, I would have credited you with a little more fight. Nobody was fooled by a twit troll. Your style and outlook are halmark. Nobody mistook his writing for yours.
Well, not nobody. Most of us.
In fact, I think you should try to reclaim your sig in a few. . .
Gail, just because I think it’s OK for you to smoke pot if you want, it doesn’t follow that I’m in favor of “child molestation, vandalism, fraud, theft, arson.” These things consist of one person directly harming another. I’m sure you can see the difference, can’t you?
Steven E., you said “Adoption of such a position does free one up from thinking — that must be part of the appeal.”
I think the truth is that freedom requires people to think: “Is this payday loan the best thing for me to do?”
I think you are proposing that the government do a lot of our thinking for us. For credit unions, too, by deciding what types of loans they should be offering.
wilson,Leveling the playing field is something I have no pronlem with the government doing. Protecting its citizens is something I have no problem with, What is being suggested is that the STATE government look at limiting loan rates.
People do get in financial difficulties (re: jobs; pay; medical insurance; all hammered by the Democrats). It only makes sense that the sleaze bags waiting in the wings to take advantage of these people have their larcenous rates restricted.
I don’t think that amounts to restraint of trade, or limits anyone in making a decent living. It would allow the person a chance to use the loan as a crutch when needed. That’s a good thing.
Galahad is still here. I’m just changing my name so troll-boy will have to try to hit a moving target.
I’m going to post under a lot of names used by trolls in the past, including “Steve.”
I’m looking forward to when Steve writes, “thanks, Steve, for telling me what to think.”
What a moron . . . or as he would spell it, “moran.”
wilson–the people who make use of “car title loans” do so voluntarily only to the extent that heroin addicts “voluntarily” use opiates.
Your point about crimes that hurt others is a good one–the problem is that these “businesses” DO hurt others. The cash-strapped people who get preyed upon by these lenders have children, who are then abused by the privation they face as surely as if they were locked in closet.
If you think these car-title lenders don’t hurt people and families, you don’t get it . . .
Just a question.
How are payday loans different from a person going to a loan shark for a fast loan because of hard luck?
It’s the same only we’ve legalized it.
wilson, et al.,
I am going to concede that overconsumption is part of the problem. There has been an unfortunate cultural shift in attitudes about borrowing. It has become acceptable to many people to have levels of debt that would have been undreamed of just 30 years ago.
As my good buddy, Howard Karger says:”For example, a sign in one Wells Fargo bank advertised that home equity loans could be used to buy a new car, pay off bills, or go on a vacation. Just a few decades ago, drawing out home equity for these kinds of purchases would have been anathema to homeowners and the conservative banking industry. This represents a dramatic change in the culture of borrowing” (2005, p. 36).
Having acknowledged the above, the fact is that fixed costs (mortgage, child care, health insurance, vehicles, and taxes) have gone up dramatically over he last few decades. Today, 75% of the paychecks of two person income households go toward these fixed costs.
wilson, the free market philosophy you are touting works best when players enter into these agreements on relatively even ground. The poor, and increasingly the middle class (through fault of their own, or due to fixed costs that are increasingly hostile to them) aren’t entering into these agreements on equal footing any more.
I do believe that more traditional lenders will wake up and see that there is a money to be made with these small loans. Better loan alternatives for the under-served, but growing part of our economy (working poor – credit-challenged middle class) is an important part of the solution.
State usury laws vary quite a bit. Some states, such as New York, outlaw PayDay loans all together. I think that is a good idea.
Wilson, you and I will never agree on this subject. I have to suspect that the consistency of your being an apologist for these predatory lending companies may mean that you have more than a passing/philosophical interest in these businesses? It’s hard for me to see how anyone could argue that PayDay lenders are a good thing for individual borrowers. Or, how anyone could deny that these businesses deplete a portion of our economy (that has an untoward effect on me – that I did NOT volunteer for).
wilson, a better way is coming despite your arguments for the status quo.
Steven E., I definitely believe that payday loans, for most people, are not a wise financial strategy. I don’t think I’ve ever said that they are good, and if I gave that impression, I apologize.
Didn’t the Gruver article say that a change in Kansas law last summer that let lenders charge more fees or interest led to the rapid increase in payday loan stores? I am sure that if interest rates and/or fees were limited, there would be the decrease in payday lenders, as you have stated.
I think it would be nice if credit unions or traditional financial institutions would make loans to people in need. But people in need are often poor credit risks, and for a bank or whatever to make the loan, they need to charge a correspondingly high interest rate, or fees. Otherwise the bank will probably loose money and go out of business.
After all, probably most of the people using these payday lenders have already reached the limit on their credit cards, and are probably paying a pretty high interest rate on that debt. Or, their credit is so poor based on past abuses, or it is not yet established, and they can’t get a credit card. In either case, lending to these people is a poor risk, and I think that’s why traditional lenders don’t make these types of loans.
Now some writers have stated that the availability of loans is what keeps people from committing crimes to get the money they need. But you can’t keep borrowing forever, can you? (Well, actually, it turns out that you can. You can borrow, declare bankruptcy, and you’ll be getting new credit offers pretty soon, say the New York Times.) Taking out a few payday loans, or the new types of credit union loans that some have advocates, may delay the day of reckoning for a while, but I think that most of these people have such deep-rooted problems that no matter how much you gave them, they’d need another loan soon. If no loan is available, then what?
You know, Steven E. the more payday loan stores open, the more competition there is, and that may bring down the cost of getting a payday loan.
wilson,
Unfortunately there has been a mind-set change in our culture where people appear to think they can keep borrowing forever and never have to worry about paying off debts. Traditional lenders have fostered this idea with credit cards. PayDay lenders also work to get this message out.
There is a TV commercial where a guy needs a little money for his kids’ Christmas Toys — he goes to a PayDay type lender — they help him out and provide a valuable service (pardon me while I gag on that one). There is an advertising effort to “normalize” using payday lenders – I am very troubled by that.
Yes, the main reason there are so many of these lenders here is the legislature now allows 390% APR on PayDay loans ($15 for every $100 borrowed). In Montana a top rate of 871% APR is allowed by State law; Wyoming allows up to 780% APR. So, things could be worse in Kansas. I would be interested to know how the lobbying effort convinced our legislators that helping these businesses with their rates was a good idea. I am going to start bugging my State Rep. again to see what she knows.
I think a credit union could make money on unsecured loans at 28 to 30% APR. Many PayDay lender customers are illegal aliens who are afraid of doing business with a bank and their home cultures did not provide much experience in dealing with banks.
Another large pool of customers for many payday lenders is military families. These families are people who are definitley cash strapped. Doesn’t seem like the way to treat our troops (who do make big sacrifices for the rest of us), if you ask me.
If credit unions are to offer lending services to the PD borrowers they will definitely have to undergo some changes. Change is difficult, but less so for lending institutions if it can be demonstrated that interest money is available.
We see things somewhat differently, but I do appreciate your interest in this topic.
Enjoyed your editorial in the paper today, Steve. I think you just may influence a change.Good job!
Thanks for reading.
Like anything worthwhile in life, it will take a lot of hard work to make much of a change.
I think this is an area where hard work would be worth it.
Steven E.,Good editorial! Keep it up and don’t let this issue die; it really needs reform! A lot of us will be backing you. Thanks!
Steven E., perhaps you said this and I glossed over it, but how do you propose to encourage credit unions or other traditional lenders to start making the loans you say they should make?
There is no law preventing them from making the loans at the present time, is there?
wilson,
You are right there are no laws preventing CUs from making these loans at this time.
My plan will involve having the people at CUs see the opportunity that exists here in the context of dealing with borrowers they don’t usually serve. I think the change can be made without the government stepping in to help.
Having CUs help folks like these borrowers is the place where my plan more or less hinges, and if the CU people won’t help I will be back to square one. Not the first time for me . . . This disappointment, will be an opportunity in disguise, as my father used to say.
Thanks for asking.
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“Unfortunately there has been a mind-set change in our culture where people appear to think they can keep borrowing forever and never have to worry about paying off debts. Traditional lenders have fostered this idea with credit cards.”
maybe they have learned the geo bush economic lesson. borrow and spend.
seriously, MBNA was the leading donator to the political parties, and hiring of lobbyists with no other reason than to get the bankruptcy laws changed.
why…so they can continue to suck consumers in to high interest credit card debt, and then block them from declaring bankruptcy.
it’s all a big business, big returns thing.
and all this time you thought the govt really cares about the average consumer?
people have to borrow there because traditional lenders don’t want high risk customers…like the tote-the-note car lots.
It’s too bad that natural selection won’t weed out those who exhibit absolutely no self control over their own finances.
It is not the government’s job to protect people from themselves. I’ll gladly pay the government to protect me from harm, but just because someone is charging a high price for a product doesn’t mean the government should step in.
It’s as if we assume we know what’s better for everyone. Just because people of low income typically use more payday loans, its no reason to assume they are of low intelligence.
Everyone can make their own decisions. The fact that there is so much information out there on payday lending suggests that extremly little research is required. This is not a scam. It’t just expensive.
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i agree it would be very good that such issue will be discusses. but since i just see this online, can i know when this news was?that is totally a assurance and security as well if there limit i think. but then how would that be when the your needs exceeds more on what you limited loans can support? since you reach a certain limit then, how can it be? i think proper planning or management!i have read something about it on http://www.personalcashadvance.net – there lots of articles there.
i partly agree with Instant Payday Loans, as far as i am aware i practice good management yet i end up to such thing.
certainly the solution here is that there really should be limit.
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Payday loans stink at first sight, but it’s not like anybody is forcing people to use their services. People make bad choices all the time. Doing business with payday loan companies is just another stupid choice. I would imagine the default rate on these kind of loans is pretty high, hence the exorbant interest rates.People who use payday loan services made their own bed. Is it wrong to expect them to lie in it?
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People making a decent wage get into credit trouble..and who’s fault is that? The people with the credit cards!
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The “let them eat cake” attitude of some of our more privileged { never been broke or know the desperation of what it’s like to be broke } posters is indicative of why Marie Antoinette got her head chopped-off during the French revolution. Thou that danger of the guillotine’s revenge is not present now, the callous remark about “it’s their choice” still bears out a pathetic ignorance deserving of such a fate.
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but i think i still comes down on how one getting a personal payday loan should use it for. sometimes there are sorts which get personal payday loan though it’s unneccessary.
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My advice is to try and avoid payday loans. See if you can get a loan from a family member or friend first. If you cannot then maybe a payday loan is the only alternative you may face. Payday loans can give you immediate cash, but must be repaid in 1 to 2 weeks. Also the high interest rates will most likely make the payday loan more costly then most people can handle. Just say no.
My advice is to try and avoid payday loans. See if you can get a loan from a family member or friend first. If you cannot then maybe a payday loan is the only alternative you may face. Payday loans can give you immediate cash, but must be repaid in 1 to 2 weeks. Also the high interest rates will most likely make the payday loan more costly then most people can handle. Just say no.
SHUT THEM DOWN. These loan sharks are feeding on people that are either in a circumstance that they cannot recover from – even with the Payday loan – or they cannot manage their finances – in which case the Payday loan will only make things worse. These loan places are no different than a scum-lord that feeds on small loans to disabled people until they receive their next check. If you ever have a loved one that falls into their trap you will wish these places were out of business.
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I have been poor, and I have been not so poor. These Payday loans places serve a valuable service. THey give short term loans to people who cannot receive them. Big deal. $15 for $100? for a week or two? THis stuff happened all the time in the military. It worked fine. Pay the bill! How much would you let them charge? 30% per annum? Let’s see, for a $100 loan that is about $30 interest per annum. So for 2 weeks, that’s about $1.50. So, they should collect less that it would cost to write the loan? Get real, quit trying to nanny state everything. The government is not the answer to everything. I know that is a big surprise to many of you socialists
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Steven E.,
Credit Unions can only serve customers listed in their charters. Some cover regional areas like SC so they could serve any Sedgwick County resident.
They do make small loans. I have gotten several $500 – $600 loans, but they cannot make risky loans. If the person(s) cannot reasonably expect to pay the loan back, then cannot legally make the loan since they are putting other people’s money at risk.
Over the last several months, I have contemplated using these businesses, but I chose not to, even when my ability to meet bills was exceeded by my bills.
Many of the people using these services are the working poor, and I don’t mean the $30K+ crowd; I am talking about the $24K and under crowd. Once you get started, you can quickly snowball into 20+ loans easily.
I think limiting the usury to whatever the state law is would help, but we had that system in play better back before they changed the law.
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The “solution” we proposed is further government regulation of the financial institutions that provide payday lending services, usually in the form of caps on the fees that these business firms can charge. Of course, further government intervention is not the answer. Indeed, it is previous government regulation in the consumer finance industry that has, in part, led to the rapid growth of the very payday lending practices so reviled by critics. As always, the law of unintended consequences prevails, leading to outcomes that are directly opposite those sought by government regulators.http://www.paydayland.com http://www.paydayland.com.au
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How about limiting the usurious interest rates while you’re at it?
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