Attorney General Misleads Teenage Consumers re: Payday Loans

Oh boy, where to begin with this one…

The Web site for a state Attorney General’s office provides a section that is supposedly geared at teenagers. Entitled “Teen Consumer,” the aim is to “educate” young consumers about financial matters. On one page, the Teen Consumer takes on payday loans, and it’s a bit of a mess, particularly for something on an official government Web site.

Here’s why. It isn’t all bad, but there are enough problems to warrant sending this back to the drawing board. I’ll take it from the top, because payday loans and cash advances aren’t getting a fair shake…

“They claim to offer an easy way out of debt” - What do they mean by debt? Owing so much on a bill, but being just a bit short of money to pay before your next payday, or being in 15 grand to the mob? It’s ambiguous, and if this is left to the imagination, the sensational won’t be too far behind. The typical reality is that payday loans are indeed more useful in the former example. They’re for small-scale, short-term financial assistance. They’re convenient, they’re quick, but they aren’t miracles. If you have heavy debt, seek advice from a financial adviser.

No Fax Payday Loans

“These finance companies make it seem like free money” - Young people are smarter and more sophisticated today than the popular media would have us believe. The information about costs for payday loans isn’t hard to find - it’s all a matter of what you define as “hard.” Is information hard to find if it isn’t plastered across the home page of a Web site like PersonalMoneyStore.com or personalmoneystore.com in pink neon? Please!

Teenagers are at the forefront of technology; when something interests them, they find out about it and do it. While teenagers (particularly those under 18) are not eligible to take out payday loans in most cases, if they were eligible and needed the product for a short-term financial need, why should we think they wouldn’t try to figure out something about it? More than anything, modern teenagers see through malarkey. “OK, dude wants to give me free money for my problem… nothing seems suspicious here… I’ll take two of those!”

“Payday loans are also called high-risk loans, loan sharking or cash advance loans” - OK, the last of the three examples is commonly used by the industry. But the first two are loaded propaganda. “Psst. Hey, teen. Over here. Want a high-risk loan? I’m a loan shark; you can trust me! I have rows of sharp teeth to gouge your credit!” Get a reality check.
“According to the FTC, payday lenders usually look for people who are high in debt or have a history of using high-risk lenders” - This just doesn’t make business sense. “Let’s target people who will have difficulty paying our loans back… that’s a great way to make money and float a business model!”

Then, the Teen Consumer goes on to offer alternatives to payday loans. I’ll touch on a few:

“Try a small loan from a credit union.” - OK, but what if your credit is less than perfect. Will you still be eligible for a bank or credit union loan? Plus, what if you only need a loan for a small amount? Many banks and credit unions won’t even hear of it.

“Ask for a pay advance from your employer.” - Does this even happen anymore? Highly irregular at best, I’m sure. This isn’t the age of old TV Fred F. or George J. asking Mr. Slate or Mr. Spacely for an advance, this is 2008 - not 1968.

“Consider a loan from family or friends (be sure to have the terms of the loan in writing)” - Sure, if you are willing to put your relationships at risk for money. It isn’t wise. Even in writing, how will that protect you against any potential bitterness if there’s a problem in paying the loan back on time? The relationships of family and friends are more valuable than a cash advance; I don’t believe that’s worth the risk.

Cash Advance Online

“Use a credit card advance” - OK, fine. But many credit cards charge around 30 percent interest for cash advances. How is that rate better than what many payday loan companies offer? Shop around. Find a comparable, possibly even better rate, and if you find a lender who doesn’t require a credit check to qualify you for a loan Personal Money Store can put you in touch with lenders who typically do not require credit checks), you typically won’t have to worry about your credit score coming into play.

OK, not all of the article is wrong. Just most of it. A modern teen definitely didn’t write this - they’d have a better feel for the effectiveness (or lack thereof) of propagandistic puffery.