I am apparently a leper within the Payday Loan industry, my article about the industry seems to have them all in a tizzy!
I have received some interesting comments and suggestions about my objectivity!
It was with much humor that I read the emails, and most particularly the email addresses being used. For spam reasons I will not reveal the entire address, but I heard from paydaylendingrep@***.com, and eezzloans@***.com. are these the kind of email address that inspires confidence?
MS/MR eezzloan offered me this sage advice: “Since you profile reads your into non-profit why don’t you start helping individuals in need with your resources for no profit? Then we can close the doors on all these places and you can save the world…..”
eezzloan, most of the people I work with are users of your services, and without your ‘helpful’ Payday loan service, they might actually be able to put ‘bread on the table’.
Paydayloan informed me “Ohioans will be left with fewer financial choices, 6,000+ people will lose well-paying jobs and 1,600 businesses will close and the state will lose tax revenue. I have a hard time understanding why, besides for political reasons, this appears to be a good idea.”
I guess Paydayloan that the question I should ask is ‘just how well are these people paid’? And maybe if they are competent, they could find jobs that pay as well, and they could be helping the economy rather than hurting the working poor.
The good news is, some of the people had credible emails, and a credible email address goes a long way. I particularly enjoyed the email from someone using the nickname of Blade:
It’s not the users of Payday Loans complaining. It’s the self righteous and the politicians. Keno is OK? Right! Win the money to pay for your unexpected car repair. And use the right facts. Would YOU lend $100 to someone you don’t know, with poor credit and $00.00 in their bank account for 2 weeks for $3.96, the proposed rate? I didn’t think so!
If this was the way that Payday Loans worked, I doubt that anyone would have a problem. Paying $3.96 for borrowing $100 is a deal indeed! I would go for that if I was cash strapped. Hell I would send them a thank you card. Alas our friend Blade is missing one very component of the Payday Loan formula, the fee;s. On a $100 loan the processing fee will be in the $20 range. For a $100 Payday Loan, you can reasonably expect to pay $125 two weeks later. When you factor the fees into the equation the much touted 391% APR is completely meaningless.
Many people rely on the Payday Loan, and every two weeks they head down to the local store, because of the last loan they need another. To many folks it is a revolving line of credit. When you put the numbers on paper though, it becomes a horror show. Every time they get that $400 to pay the rent, or the utility company, or put food on the table, they have to pay approximately $525. Over a year they have made the Payday Loan company $1500 in fees and interest. $1500 is a sum of money that could well change their lives, but they have nothing to show but an empty bank account.
One of the people aiming barbed remarks at me actually does have some credibility, he offered a real name, and I plan on doing an interview with him. I am interested in discovering the other side of Payday Loans.
As to the rest of you, I have only one question, if you think the industry is so ‘up standing’, how come none of you are willing to publish your name? Afraid of the heat? My mother always said, if you can’t stand the heat, don’t come in the kitchen. I publish my name, but there again, I have nothing to hide.
If I was selling a hot product, I sure would want my name out there!
Simon Barrett
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4 users commented in " Payday Loans – The Industry Fights Back (At Me)! "
Follow-up comment rss or Leave a TrackbackSimon,
I use this email address for transparency purposes. That way you know where I am coming from and that I represent the payday lending industry. As spokesperson for the Community Financial Services Association of America (the national trade association of payday lenders), I would be happy to interview with you answer any questions you have.
Regarding your question about what kinds of jobs these 6,000+ people will be losing are, I can’t speak about every job as they differ by company, but many are full time and have healthcare and retirement benefits. With a 5.7% unemployment rate in Ohio, losing even one job is not a pretty prospect.
I also agree with commentator Blade, why protect people from payday lending but not from empty promises of Keno and State lotteries?
Regards,
Lyndsey
The Payday Lending Rep
Simon,
Viewing payday loans in terms of an annual percentage rate (APR) is simply dumb. The APR of a small-dollar short-term loan tells you nothing about how profitable the loan is for the lender, because it doesn’t factor in his cost in making the loan, and it tells you nothing about how wise the transaction is for the consumer, because it doesn’t consider his other alternatives.
The APR, as a statistical tool, only has value for comparing loans which a consumer has access to. If all other factors are the same, his wisest choice is the one with the lowest APR. But the great majority of payday loan borrowers cannot borrow money at credit card or personal loan rates. In many cases their only alternative to getting payday loan is having their family evicted because they can’t pay the rent, losing their job because they can’t get their car repaired, or bouncing checks and maybe losing their bank account in addition to incurring returned check fees higher than what a payday loan would have cost.
There is no doubt that for many people payday loans are an extremely valuable option. Researchers from George Mason University and Colby College recently found that “access to payday loans in their environment, all else fixed, increases a borrower’s probability of financial survival by 31%.” See http://news.findlaw.com/prnewswire/20080206/06feb20081017.html
No valid purpose whatsoever is served by translating the fee for a two-week payday loan into an annual percentage rate and then claiming that the “triple-digit” APR is “high” or “outrageous.” The APR of a small-dollar, short-term loan must be high, relative to other types of loans, due to the high ratio of the cost of making the loan to the amount being lent, and people who don’t have good credit and whose only collateral is the fact that they have a paycheck coming can only qualify for a small-dollar, short-term loan. That’s just the facts of the matter.
If a 365% interest rate was “outrageous” then the statement “I will lend you $100 today if you will pay me back $101 tomorrow” would be an outrageous statement - but it isn’t. In fact most people would not make that statement because they wouldn’t want to risk losing $100 for just one dollar in profit - and that doesn’t even consider that payday lenders loan to people who have bad credit, or any cost whatsoever in making the loan!
Of course some people get themselves into trouble with payday loans, but that is true of every good thing. A lot of people eat way too many desserts and give themselves serious health problems. But do we really want to ban ice cream or put a cap on the percentage of sugar it can contain?
People who support a 36% cap on loan rates want to make it illegal - in the United States of America - for any citizen to say to any other, “I will lend you $100 today if you will pay me back $100 and ten cents tomorrow.” Is that the land of the free and the home of the brave?
Consumer activism is supposed to be about protecting consumers from deceptive advertising - not telling merchants and service providers how much they can charge. If the government can tell a lender how much he can charge, then why shouldn’t it be able to tell doctors, lawyers, and free-lance secretaries how much they can charge as well? Do we really want a state where politicians, for dubious reasons, can regulate what everyone can do, or do we want a free-market system where certain inalienable rights are guaranteed? And this is not only the right of the lender, in this case, to set his own price in accordance with market conditions, but the right of the consumer as well, to make his own choice as to what service he wants to avail himself of, without politicians, who are supposed to be our servants, trying to be our parents and limiting our options supposedly for our own good.
The opponents of payday lending have presented no clear evidence that more than a few people who use the product get themselves into trouble with it. And these are people who take out a loan promising to pay it back in two weeks and who then pay nothing whatsoever towards the principal, payday after payday. Because of that politicians want to eliminate the emergency loan industry which saves lives in addition to being an economic alternative to bounced check fees, credit card late and overlimit fees, etc. This is madness.
George McGovern recently wrote this piece in the Wall Street Journal:
http://online.wsj.com/article/SB120485275086518279.html
Additionally, newspapers have reported as gospel truth the contention of the Center for Responsible Lending that the average person who takes out a $325 payday loan ends up paying $793 in fees. But Veritec Solutions, the company whose statistics the CRL used in making that determination, subsequently issued an analysis saying:
“Veritec finds that the following conclusions made in the CRL Report are not an accurate reflection of statistical information published by Veritec in the referenced reports.
1. That the study finds that ninety percent of payday lending revenues are based on fees stripped from trapped borrowers (refer to page 6, Finding #1).
2. That the study finds that the typical payday loan borrower pays back $793 for a $325 loan. (refer to CRL Report page 6, Finding #1).
3. That the study finds regulator data corroborates high levels of loan flipping (refer to CRL Report page 6, Finding #1) and that regulator data confirms that most borrowers renew payday loans many times per year. (refer to CRL Report page 7, Finding #1)”
The analysis can be seen at:
http://www.veritecs.com/CRL_Whitepaper_Analysis_R1.pdf
The Consumers Rights League has issued its own report on the Center for Responsible Lending. See “Predatory Charity: The Self-Interested Self-Help of the Center for Responsible Lending” at:
http://www.consumersrightsleague.org/News/DocumentSingle.aspx?DocumentID=21850
Please reconsider your position on this issue.
This argument is not about 6,000 jobs, most of which pay barely above minimum wage and are less than full time. This is about the hundreds of millions of dollars in fees going from working poor families into the pockets of a few relatively wealthy executives who run the payday lending industry in Ohio. I would imagine that the hundreds of millions of dollars that Ohio consumers will save will go a long way in stimulating the creation of well over 6,000 jobs.
And as for the argument that these are 2 week, short term loans, the numbers that the payday lenders themselves admit to show that this is not true. The industry’s own numbers state that once a person takes out a payday loan, they average 11 loans a year for a 2 year period. This is not a 2 week loan, it is a 2 year loan, with a 15% fee every time a borrower re-borrows the same money.
Banks are not legally allowed to charge these sorts of rates. Credit unions are not legally allowed to charge these rates. The only reason that payday lending exists in Ohio is because they were given an exemption to the small-loan act when the bill was originally passed. This was a bad idea at the time, and this legislation has hurt hundreds of thousands of Ohioans. The end of payday lending will be a great thing for Ohio.
Ohio consumers won’t save any money, Jeff. They will spend more money than payday loans cost them now on bounced check fees, utility reconnection fees, credit card late and overpayment fees, lost wages from not being able to get to work because they couldn’t get their car repaired, additional doctor and hospital visits because they couldn’t get their medication, and some people may be evicted in the dead of winter and actually lose their lives.
I’m sure they’ll be very grateful to you for your help. And hopefully one day you’ll be in need of a small-dollar loan to tide you over until your next payday - don’t think that can’t happen. And then you won’t be so big on making bogus statements (your entire second paragraph) and restricting people’s freedom for no good reason whatsoever.
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