What your legislators tell you its going to be

Payday loans remain an issue in Arizona. Consumers want them, politicians who represent themselves and their squeaky wheel interest groups ahead of average constituents want them out. This legislation wastes taxpayer time over how payday loan and other legislation can make the ballot.

Daniel Scarpinato of the Arizona Daily Star reports that Arizona voters could have the chance to vote next year on how ballot measures make it to the polls. This was prompted by a number of issues among 2008 ballot measures, including the Payday Loan Reform Act (which was on the ballot as Proposition 200). New legislation would make changes to how citizens gather signatures and put items on the ballot and how legislators would refer items to the ballot. If voters green-light the measures, they would go into effect in 2012.

What can it be now?

Here are just a few of the changes big brother seeks:

• Reduce the number of total signatures that need to be gathered for an initiative to reach the ballot
• Allow legislative staff to propose changes to a proposal. Petition organizers can reject the changes
• Legislative staff will establish the official name of a ballot measure

Buttering their own bread with kickbacks

Looking at the above points, it seems clear to Cash Advance Mojo that big brother is trying to worm their way into a position of complete control over how ballot measures (like Proposition 200) are presented to the public for vote. The person who has the power to name a thing controls that thing. It’s all about perception and psychology, and politicians know how to spin public perception in the desired direction as well as anyone on the planet. Furthermore, they even throw the bone of requiring fewer signatures in order to make themselves appear generous.
Banks, corporate-controlled media, politicians and other nefarious special interest groups like the Center For Responsible Lending simply can’t handle consumers having the choice for payday loans in their hands. Thus, in attempting to walk the legal line, they’re going to make it as difficult as possible for the short-term consumer loan industry to exist. Don’t say that they’re in this to protect consumers. Evidence exists that getting rid of payday loans actually hurts consumers (in part by driving them to inferior alternatives like checking overdraft protection).

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Freedom of Payday Loan Choice

Mr. Pearce sounds like he has a great deal more perspective, or at least more than knee-jerk critics of payday loans seem to have. It’s quite simple, he feels. “At times, people have no other place to go to for a loan.”

Mr. West, who lambastes Pearce in his letter to the Arizona Republic, goes on to make a comparison that he feels is viable:

Should society legalize brothels even though it may be the only place some men can go for female companionship?

It could be argued, Mr. West, that the legalization issue you jokingly propose is a moot point in light of the real problems people face in this world. With the proper controls in place, where is the exploitation? Payday loans already have protections in place that serve the public, and nobody is being forced to use the product in an irresponsible fashion. What is your point, Mr. West?

Other Republic readers disagree with West about payday loans

Reader Marcparella responds to West’s comparison with a view rather close to this author’s:

I don’t have a problem (with legalizing prostitution). And I don’t have problem with payday loan outfits either. I would be in favor of regulating the industry and making sure Truth in Lending Laws are practiced (They are – Ed.).

Then Marcparella raises even more valid comparisons:

Would you outlaw used car dealers? Or financial institutions that charge outrageous default rates? Or online college programs with “iffy” accreditation, or how about all of Wall Street for that matter? Seems like those folks did more damage to our society than reputable short-term loan outfits. The bottom line: it is a “buyer beware” world.

Marcparella recognizes that no matter what a consumer is considering, healthy caution and moderation are wise. So does Scot, another reader:

Where would you draw the line between legitimate lenders and an industry which “preys on the vulnerable” in our society? Ignorance and stupidity make one vulnerable, and the world is full of people and businesses who take advantge of that. Just look at the “affordable housing” industry and where that got us. The fact is, one cannot legislate against stupidity. People must take responsiblity for their own welfare, not expect someone else to take care of them. The payday industry is only furnishing something that people either want or need, or think they do.

People must have the freedom to choose a payday loan if they want

The freedoms granted to Americans by the Constitution give us the right to choose a product like payday loans if we are in a fix and need some cash assistance before the next payday. Lobbying for that right is within our rights. It is as simple as fighting for what is right for a significant percentage of the population, not for something that may be unwanted competition for the select few (banks and credit unions).

Payday loans are still a hot topic in Arizona, where the pain of Proposition 200 is still felt. In a recent “Letters to the Editor” in the Arizona Republic, those in favor of banning lenders from operating in the state past 2010 are out in full force because legislators may just be recognizing the true needs of their constituency-at-large, those who may not have been represented in the voting process.

Reader Dave Hall from Sun City West points out with clenched teeth that the “sharks” spent $14 million to lobby the voters in support of keeping payday loans available in Arizona. Yet at the same time, perhaps banks and credit unions spent just as much (or more) to mobilize their own support against Prop 200? It isn’t far-fetched at all.

Welcome to the world of lobbying

This is how American government works. Per Wikipedia, “Lobbying includes all attempts to influence legislators and officials, whether by other legislators, constituents or organized groups. Governments often define and regulate organized group lobbying.” There are always multiple sides to an issue, so lobbyists acting on behalf of their interest group come from all sides.

Economist Thomas Sowell in his book “Knowledge and Decisions” defends the type of corporate lobbying that goes on with payday loans or any other lobby. He says it is “simply an example of a group having better knowledge of its interests than the people at large do of theirs.”

A fresh serving of perspective

On an even larger scale, the case for lobbying has legal precedence and is an accepted part of politics. The U.S. Supreme Court does not support those who have tried to regulate grassroots-style lobbying, as the Constitution does not suggest such censure:

It is said that indirect lobbying by the pressure of public opinion on the Congress is an evil and a danger. That is not an evil; it is a good, the healthy essence of the democratic process.

Former U.S. President Bill Clinton paints a clear picture of the place lobbyist have in American politics. He said this is regards to wife Hillary’s receipt of lobbyist money for her recent presidential campaign:

Lobbyists are registered, they register with the federal government and can give the same amount of money anybody else can. It’s all the people they represent. So all these people who don’t take money from lobbyists, they take money from the lobbyists’ spouses, their children, their brothers, their sisters, from all the people they represent. It’s a distinction without a difference, I think. There’s no significant financial gain, because there’s not that many lobbyists. If we’re going to take money from the guys who pay the lobbyists, why treat them [the lobbyists] as less than full citizens?

Here’s the uncut interview with Bill Clinton:

Were all Arizona voices on payday loans heard?

Lobbyists are a necessary part of lawmaking, as they help to inform lawmakers who may be removed from the problem to see viewpoints clearly. In the case of the industry responsible for payday loans, legislators are not a part of the same socioeconomic group as many short-term loan customers are. It helps to have added perspective when making decisions. The issue of Proposition 200 could be revisited with fresh perspective from both sides, not just the lobbyists on the side of the banks.

Senate-elect Russell Pearce, a Republican out of Mesa, Arizona, has decided he will push to extend the licensing for payday loan businesses, as some added perspective has apparently enabled him to see that payday loans are not the trap that destroys credit ratings, just as a cheeseburger does not condemn someone to a life of obesity. Individual restraint and responsibility will always be paramount.

You have the freedom to read on… PART II of this post is here. There may be payday loans in Arizona past 2010 yet.

Payday loans are predatory? Thats what the opposition would like you to think.

The war over payday loans continues in Arizona. Last week voters rejected Proposition 200, a ballot initiative financed and written by the loan companies to allow them to continue to charge their current interest rates on small loans.

Those who voted against proposition 200 claim that payday loan stores take advantage of and prey upon the poor.

What? “Prey upon the poor”?

This isn’t the animal kingdom, these brick and mortar stores are not preying on anyone, but they will be praying to stay in business if they can’t persuade lawmakers to ignore the voter’s wishes which was counted 60% to 40%.

Propaganda is to Blame

Much of the propaganda against the loan companies comes with talk of the payday lenders interest rates on the short term loans they give out. Even though, by law they can’t charge more $17.65 for a $100 loan, the opposition advertises the interest rate in terms of APR, so you would have to literally default on your two week payday loan for an entire year to accrue the APR interest rates that the opposition uses in their campaign against the small loan establishment.

Unfortunately, many voters who have no experience with payday loans are easily swayed by these twisted truths. If lawmakers pass the new new initiative their will be a 36% interest rate cap which means lenders will only be able to make $1.36 in revenue for every $100 they loan out. This will drive them out of business overnight.

Preying on the Poor?

As for preying on the poor, this is a shot below the belt by the uninformed and uneducated opposition. You cannot qualify for a payday loan, unless you have proof of income. In fact the average consumer who takes out payday loans makes between 30K and 40k a year.

A closer look at the truth!

As for being predatory, Payday loans don’t pounce upon you while you are sleeping nor do they lie in wait in unsuspecting places to devour your financial resources. There is no element of surprise here. When it comes to payday loans the consumer is not under attack. They have to initiate the search for there payday loan source, read the contract and sign it themselves. It is a service that is provided with terms and conditions that consumers can simply say “YES” or “NO” to. No physical force, no hypnosis, no telepathic mind control, or anything of else of the likes. Just a simple choice.

This kind of opposition is only opposing the freedoms that Americans have to decide for themselves. The only predator here, is the opposition against the payday loan companies.

If you want a payday loan, great! If not, fine. I couldn’t be simpler or more straight forward than that.

Installment loans offer consumers the freedom of choice when it comes to those emergency situations where the budget won’t stretch quite far enough to cover an unexpected expense. However, if we are to buy into Melissa Blasius’s of NBC 12 News report, we would assume that just because the bad credit installment loans industry has spent a large amount of money to support YES on 200 efforts means that they are self-serving and are not interested in real reform.

Blasius breaks out the common and oh-so-misinformed “400

PERCENT APR!” yawner, which has no bearing on payday loans, short term loans or anything related. Payday loans are TWO-WEEK loans, not annual loans. The percentage rate a consumer pays is 15 percent if their lender charges $15 per $100 loaned. The fixation on APR (annual percentage rate) that the media, banks and credit unions have is based originally upon the 1968 Truth in Lending Act, but now it’s merely a false rallying point.

Short term installment loans operate differently. As the name implies, they work on an installment basis, making repayment much easier. Plus, the consumer is the one who chooses their debit date.

Banks and credit unions want short term lenders put out of business because they pose too much competition for their big moneymaker: check overdraft protection fees. If you want to talk scary interest rates, take a gander at this report from the Center for American Progress. Americans are paying in excess of $17.5 billion per year. Ouch!

If you want to know the REAL deal about why you should vote YES on 200 in Arizona, check out this site. Then you’ll see why short term installment loans are useful, inexpensive compared to the options banks and credit unions would like you to have and essential if we are to maintain the consumer’s freedom of choice when it comes to how they will manage their finances.

With a national election just over a month away, the ante has been upped in the ways that candidates are bashing not just their opponents’ (lack of) credibility, but they as people. As a matter of fact, I haven’t been able to watch an hour’s worth of nightly news over dinner for the last few months, without being berated with a fistful of slanderous attack ads from all over the political spectrum.

Biased Reporting

But even worse than learning of John McCain’s excessive investing in fine automobiles, or Paris Hilton’s worship of Barack Obama, the media’s reporting on various ballot measures in various states has proven to be biased and downright problematic. A glaring example of this “objective” journalism arrived in my Google Alerts this morning (10/2/2008) entitled, “Critics Call Proposition 200 a Trap, Not Payday Loan Reform.”

Tucson Citizen Reporter Garry Duffy begins his anti-Proposition 200 diatribe with the rhetorical question, “Would you knowingly take out a loan with a potential 391 percent annual interest rate that included allowing the lender to electronically raid your bank account for payment?” Members and supporters of the no fax payday loan industry never would do that, for the simple reason that taking out a loan with 391 percent APR is simply absurd. However, despite Duffy’s sensationalized, desperate attempts for readership, the truth is that a person who utilizes a no fax payday loan, as intended, will never even pay a fraction of that in the brief period of time the transaction is outstanding; typically two weeks.

Fully Aware of Terms and Conditions

As for the allegations of payday lenders going in and electronically debiting money from your bank account without you knowing; these allegations are outright lies. Long before an online or brick and mortar payday loans company will give you money, there are detailed applications and contracts that you must sign. When you sign the documents, you acknowledge, in writing, that you fully understand how a lender will collect repayment on the due date, and that you understand your rights as a no fax payday loan customer. So, if you note on your application that your next payday is October 14, you must sign a legal document stating that you understand that the lender will acquire their balance due on October 14 by electronically debiting your checking account. In other words, no payday loan customer is kept in the dark, and no shady practices exist.

Duffy then backs up his fallacious case with stories of “real” people who got in over their heads by taking out a small loan, but ended up paying hundreds of thousands more by rolling the loan over time and again. One of these stories includes the woe-filled tale of a couple who had to keep on rolling over previous payday loans, then took out additional ones to make ends meet; yet another victim of sensationalism, completely ignoring the couple’s obvious lack of financial literacy.

Reading The Headlines

What Duffy also fails to mention is that in most states where no fax payday loans are legal, loan rollovers are severely restricted or completely forbidden. Instead, if someone is unable to pay their balance on the loan’s due date, they are to be given a repayment plan at no additional cost. As a person who minored in Journalism in college, I understand that the Tucson Citizen is a business. I completely understand that the front page story, “Payday Lenders Really Help People When Used as Intended and With Proper Budgeting” won’t sell half as many newspapers and save jobs like the headline, “Loan Sharks Running Payday Loan Companies Ravage Your Bank Account without Your Consent,” will. I feel your pain, Duffy; I really do.

Desperate Attempts To Gain Readers

Our cravings for the latest news and information preserve the livelihoods of lowly news reporters across the nation. However, these jobs should not be retained at the expense of the objectivity, which is still trumpeted within the media’s mission statement. This is where my biggest fear lies at the moment; the newspapers need big, nasty, juicy articles in order to keep their readers coming back for more. But some of these organizations have gotten so desperate to attain this goal, like in the case of reporting on Arizona’s Proposition 200, that they are resorting to the use of half truths and bald-faced lies. Therefore, in order to make the best decision on Election Day, it’s in your best interest to familiarize yourself with all sides of an issue. Find out all the facts about payday loans here at Personal Money Store.