FACT or FICTION: Regulating The Payday Industry
The payday loan industry is getting a lot of attention, especially in the states of Ohio and Arizona. Those on the outside possibly do not fully understand the payday loan industry and there are some misconceptions about the short term loans.
Myth: Payday loan lenders do not want to be regulated.
FACT: According to CFSA, this is quit the contrary. Most payday lenders do want to be regulated and have certain industry guidelines. However, there are those that are trying to eliminate the industry as a whole, and not deal with keeping the “good guys” in business.
Currently, there are 37 states + the District of Columbia that have payday regulations. CFSA is working on trying to get regulations implemented on the remaining states, however they are not wanting to see the industry go extinct. Therefore, the question is… why is the payday loan industry going through such tough scrutiny, when in comparison with credit cards and other financial services there are similar costs/fees associated with them?
Leadpile Lead Exchange understands there are a lot of myths about payday loans, however the key is for those that are not fully educated on the industry, to read up to fully understand all aspects of this financial product compared to others. There is good to these types of loans, and they are sometimes very much needed.
Thanks for shedding some light on this misunderstood industry. There are responsible lenders and responsible borrowers in the payday industry that have helped make it the popular credit option that it is. However, just as with any form of credit, there are those who abuse it: both on the borrower and lender side. DC doesn’t allow payday lenders now, so all those customers have gone to the internet to borrow, and there they will find unregulated, unscrupulous offshore lenders that will really abuse borrowers.
1That’s why responsible payday lenders (CFSA member companies) DO want reasonable regulations that are good for business and protect the consumer. Get the facts!
Thank you, thank you, THANK YOU for not succumbing to the “myths” that constantly spewed regarding the PD Industry!!!
Banks are notorious for their EXPENSIVE hidden charges, late fees, bounced check fees, daily fees, minimum balance fees, etc. And the average profit margin for the top 10 banks in the US are 18.5% (TRIPLE!) compared to the top 5 payday lending companies in the country who are at 6.6%!! (PDF- source) So really now, who exactly is profiting more, NOT the PD companies!!! Oh and IHOP’s is 12%!!! They sure are getting rich off our eggs and pancakes! (Sarcasm)
Last week— http://www.usatoday.com/money/perfi/credit/2007-01-24-debit-card-fees_x.htm
1) “The average fee for overdrawing your account — by check or debit — reached a record high of $27.40 last year, up 11% from five years before”, according to Bankrate.com
$27.40 is ABSOLUTELY APPALLING!!!!
2) “In 2006, financial institutions earned $53 billion in overdraft fees, a 58% increase from 2001, estimates consultant Moebs Services. ”
53 BILLION DOLLARS & a jump in 5 years by over 50%— are you freaking kidding me??!!! Gee– I wonder why thousands of Ohioans decide and want to get a PD loan instead??? They are HECKUVA LOT CHEAPER!!
VOTE NO on ISSUE 5 on 11/4– Preserve Financial Options in Ohio!!
2Casey,
To better clarify your first note from the USA Today article, think how many of those checks would not have bounced if people had used a payday loan for just $100. In most states a payday loan costs just $15 for a two-week, $100 loan. They would have cut their costs in about half.
Jeff
3Payday loans are definitely a service that is needed, especially when traditional financial institutions aren’t lending in the midst of the current credit crunch and economic conditions. Another misconception is that payday lenders are not currently regulated when each state in which payday loans are present has regulations in which they are subject to audits. Organizations such as the Center for Responsible Lending and several politicians have lobbied against payday lenders, calling for additional regulation because of what’s referred to as outrageous fees. Nevermind the fact that payday lenders are forced to quote their fees in terms of an annual percentage yield; nevermind that the industry’s trade association has attempted to tackle every issue that has not been favorable; nevermind that payday lenders in the US have managed to employ tens of thousands of people in a flunking economy.
4As Jaymore said, there are reputable lending agencies in this industry, most of which are CFSA members, who want their services to be a solution to those in need of low-dollar, short-term credit. Payday loans may not be the best choice in all situations, however it is a less costly option for short-term purposes.
CFSA supports regulations that ensure that the product is used responsibly and is doing its part to encourage responsible use. To that end, CFSA member companies have taken a significant step forward in our ongoing commitment to responsible lending.
To ensure member-company compliance of the Best Practices, CFSA hired an independent firm, Global Compliance, to conduct audits of member company store locations. As of March 2008, 99% of CFSA members were in compliance. Any company that does not comply with Best Practices will risk losing their CFSA membership.
Let’s not forget – The payday advance industry exists because we offer our customers a product that is more desirable than the alternatives.
5