Finally, a little fairness
After a hearing on last week on the Payday Loan Reform Act, it appears that some legislators are beginning to see payday lenders as a necessary service instead of a predator.
A House Financial Institutions and Consumer Credit Subcommittee on April 2 discussed HR 1214.
Small differences
Many legislative hearings on payday loans have been inherently negative, with a focus on running so-called “predatory lenders” out of business. However, it appears that the consumers who want and need to have payday loans as an option are finally being heard.
The committee seemed to be in agreement that running payday loan stores out of business was not the desire of their constituents.
Enabling access
It seems the consequences of strict regulations shutting down payday loan businesses are finally being noticed. Thomas Reinheimer, CEO of Veritec Solutions of Jacksonville, Florida, recognized that good short-term credit regulation means consumers still have access to payday loans.
“We see first-hand the impact of good regulation in enabling access to short-term credit while protecting consumers from getting trapped in a downward debt-cycle,” said Reinheimer.
Facing facts
Reinheimer said his company “is at the forefront of implementing effective regulatory enforcement solutions for strong consumer protection.” He brought some statistics to the table to help other lawmakers understand the truth about payday loans and other forms of short-term credit:
- Borrowers and lenders are unable to roll-over payday loans in Florida and Oklahoma.
- Over 75 percent of borrowers pay-off their loans within 2 days of the due date.
- Grace periods and repayment plans are available under state law to any eligible borrower who can not pay off their loans on time.
- Over 25% of borrowers no longer use the product more than once per year and a majority of borrowers no longer use the product after 3 years.
Reinheimer said Florida and Oklahoma are good examples of payday lending regulation. Those states “two states that have effectively eliminated multiple loans and rollovers, clearly demonstrates that short-term lending can be regulated effectively,” Reinheimer said.
I think that the federal government is stepping out of bounds of this one. I think it is the states themselves that should be determining how they will regulate this industry. The constitution says that all matters not specifically delegated to the federal government by the constitutions should be decided by the states.
Personally, I would never take out a payday loan. I have read their contracts and decided I have better options for my short-term cash needs. If I were in a real financial pinch, I would much rather borrow from a well lit retail lender than a shady loan shark in a dark alley.
We should stop treating these borrowers like they are ignorant children. If they refuse to be informed as a consumer, let them stay in debt.
Most people are trapped in a “cycle of debt” for no other reason than their personal financial dealings. The sad part is there are a lot of financially irresponsible adults who have fallen into the same problem. Instead of locating the main source of their problems, many people would rather look for something or someone other than themselves to point the finger at.
Payday lenders have been constantly targeted by critics and the media, blamed to be the cause of peoples’ fiscal dilemmas. I don’t know, but to me it basically sounds like they are either too lazy to fix the “real” problem or they are just plain stupid. Hopefully, legislators will NOT continue this trend and set some records straight once and for all.