Justice or Just Excuses
The payday loans industry has become a touchy subject, especially lately. The frequency at which we are seeing this topic in the news, in the paper and on the internet has been alarming, but should it be? Are the opponents of the industry crying for justice because of malpractice on consumers, or are they just trying to drum up sympathy through accounts of irresponsibility to push their own agendas forward?
Where will the gavel fall? Payday loans or irresponsible consumers?
The Court Is Now In Session
Currently there are eleven states that have passed laws which have pretty much banned these loans or made it impossible to operate a payday loan business. Another thirty five states are putting caps on interest rates which have made it difficult to operate as well.
Ohio which just past legislation to cap the industries APR rates at thirty six percent, will drop the revenue these stores earn per $100 loan from the standard $15- $25 to $1.08.
Wisconsin, one of the few states that have not placed any law against the payday loans industry has over 500 of these money lenders which did about $700 million in revenue last year. There is no doubting the popularity of these types of loans and if so popular why so much anti industry slander?
Many claim that payday loans trap consumers in a revolving cycle of debt, pointing the blame and calling the industry a shame for its loan lending practices. The opposite side of the debate however, we have the industry which claims irresponsibility on behalf of the consumer. Which is it?
I would tend to agree with Greg Baer who said the following,
“I believe in the product,” said Baer, owner of “Mister Money” in Appleton, “I believe in the people of Wisconsin to make their own decision, I don’t think the legislature needs to make our decision for us.”
Of course Greg may be a little bias as he himself has personal stakes in the payday loans industry but his reasoning is solid in that we should have the right to make our own financial decisions without the law intervening. After all, if we don’t like the terms of the contract regardless of the fees or interest rates, we don’t have to apply for the loan. But, if you choose to apply you should by all means be accountable the terms and conditions you have agreed to.
What causes the cycle of debt among payday loan borrowers?
The biggest cause for the cycle of debt occurs due to the fact that folks allow there loans to roll over and thereby accrue additional fees. Because of this trend among applicants the finger tends to point negatively at the industry. Is this fair? After all, don’t credit card, mortgage, and utility companies charge consumers additional fees or finance charges for failure to pay according to their terms. Just how many times should a loan be able to lapse before a provider should be allowed to add a finance charge or penalty fee? Does a irresponsible borrower deserve the right to negate a signed contract for failure to pay?
The testimonies add additional pressure on the industry, you will read many of them and their sympathy enticing stories but you won’t get the rundown on how the fees got ran up to the current dollar amount.
Here is one such testimony from a Nicole Thyrion who took out $700 in payday loans;
“It was a 700 dollar loan and I was paying back almost $1,900,” Thyrion said, “When you first sign the contract, it sounds so good, it’s just not that way when you are writing out the checks.”
These types public testimonies against the industry by consumers are loud but weak. They try to drum up sympathy through a personal account of irresponsibility. Here Miss Thyrion and the press release this came out of leads readers to believe that there were hidden fees or a hidden agenda to rob her for $1200 more than she had originally borrowed. The facts however tell us that she didn’t pay her debt according to terms that she originally agreed and signed her name to. She would have had to let here debt lapse several times as the most she should of had to pay if the terms were met as agreed to by even the most expensive of these payday loans would have been around a $1000.
Nicole, if you are out their would you care to comment?
Two reasons for the number of default loans in the payday loan industry
The tendency that is driving folks to apply for payday loans in greater numbers is believed to be one of two things. The first is the recent credit crunch. With the banks and other loans institutions tightening there approval process, payday loans are not only the quickest possible way to obtain fast cash, but they also have the least qualification criteria. This easily explains why you tend to see a greater number of default loans with the payday loans industry versus others.
Consumers will almost always choose the path of least resistance and for loans under $1500, payday loans are the answer.
Ladies and Gentlemen of the Jury…
Their is no crime committed if their is contract signed between two parties. If you want a loan of any sorts, be sure to read the terms and conditions of the contract as you are, and should be accountable to what you sign. Surely you would expect the same from the other party.
If you think that you can borrow money from any institution and pay back at your leisure without accruing fees, please comment and let the rest of know where such a place may be!
It seems amusing to me that the payday loan industry gets so much flak for participating in “predatory lending,” and creating an “endless cycle of debt.” If someone were to really think about it, what creates an endless cycle of debt? Is it small amount, short term loans that are have very low interest if paid responsibly and right away, or taking on multiple credit cards, a car loan, and a mortgage all at the same time? The most predatory lending comes from the very banking and credit institutions that the government is bailing out right now. Shouldn’t there be legislation to cap them?