I congratulate Josh Kalven of Progress Illinois on replying to my last article. He did not run away, as most opponents do. Yet I remain perplexed as to how he dodges the specific issues raised in my article, and instead falls back on the old ad-hominem argument instead.

Josh, please return to address the issues I raised directly. I’ll reiterate them here:

1) Options for short-term credit are limited. You want to ban payday loans. What alternatives do you propose for those unable to use the other options?
2) If you have none, do you realize you are forcing them to more expensive options?
3) I posted a link discrediting the usury claim you made. Your reply?
4) Are you a government paternalist, who believes that people’s choices should be stripped away from them?

Onward:

“I take issue with the idea that I’m uneducated about how payday loans work. I’ve studied them closely and acknowledge that they can be a useful tool for certain consumers in certain situations…I’d like to see the U.S. banking system return to the days when we lent money based on one’s ability to repay, rather than models that take advantage of desperation or financial inexperience.”

Josh, I’m pleased to see that you recognize that payday loans have value in certain situations. That is outstanding to see your support of the product. However, you wanted Illinois to pass a 36% rate cap, did you not? I linked to an article showing exactly why that rate kills payday lenders.

So if you believe they are a useful tool at time, why take them away?

Josh, you perpetuate the myth that users of the product are are “Financially inexperienced”, and that payday lenders “take advantage” of them.

Here’s the truth. They aren’t “financially inexperienced”. Your inference is that they don’t know any better or that they lack the skills to make an informed decision. Josh, They know EXACTLY what they are doing. I listed the 6 options available to them. They CHOSE payday loans as the option that is best FOR THEM, by comparing the risks and benefits, including cost.

To “take advantage” of someone is to “unfairly capitalize on the position of another”. What you fail to understand, Josh, is that both the consumer and the lender believe that the product HELPS people. The customer needed money and the lender was there for them. A few conversations with customers would demonstrate this to you.

Now, you may want to see banks make loans based on ability to repay, but these short-term, unsecured, small dollar loans aren’t offered by the banks because of the transactional costs. Believe it or not, I want to see consumers have a lower cost of credit also. Heck, the Pentagon knows where their soldiers are at all times, knows they’re employed, for how long, and how much they make. They could offer 5% loans, but they don’t. I want to see that. I want to see another lower cost option on the market, if for no other reason that I could raise the money to fund that option, put all PDLs out of business and make a fortune!

But no other product has appeared, has it? Why do you think that is? Because there is no other viable option, Josh. Even Goodwill Industries, a charity, hasn’t found a way to make the loans at less than $9.95 per hundred borrowed…and they’re a non-profit!

And by the way, the repayment rate on payday loans is 94%. That number is readily available in every SEC filing of every public payday company. I’m happy to point you to those sources. So customers do have an ability to repay, and it’s been demonstrated.

So, please either support your argument that customers are “financially inexperienced” or are being taken advantage of, or concede the points that they are neither.

“I’m not looking at this issue in a vacuum either. I view these types of financial products as the extreme byproduct of the decision in the late 70s to lift the cap on U.S. interest rates. That shift has gradually caused great destruction in the decades since (see the mortgage crisis). Payday loans represent just one element of the larger problem…But I also believe that their impact as a whole represents a net negative.”

We can get into the mortgage crisis another time. But payday loans have nothing to do with the mortgage crisis. And I’d like to hear why you think it’s a net negative.

“I don’t believe that credit should be available to anyone and everyone”

First, Payday loans are only available to those people who have jobs, and a bank account.
Second, credit isn’t available to anyone and everyone. They must have a job and bank account for a PDL. They must have something to pawn for a pawn loan. They must have good enough credit to get a credit card and cash advance. THey must have collateral for a home or car loan.

Interestingly, the easiest source of credit is for anyone who only has a bank account. If it’s overdrawn, they also get slapped with the highest credit fees.

Now, Josh, let’s get out of academics and into the real world.

In Chicago, a woman living paycheck to paycheck has a car to get her to work.
She lives 2 miles from the nearest bus stop or co-worker.
Her car breaks down.
She doesn’t have any money to pay the doctor, but has a job and bank account.

In another part of Chicago, a father needs to get his child to the doctor.
The kid has a terrible cough that’s been going for days and he can’t get it to stop.
He doesn’t have any money to pay the doctor, but has a job and bank account.

Neither person wants to, or can, ask their family member for a loan.
Neither person has a credit card.
Neither person has any possession worth the $300 it’s going to cost them for the service they need.

What is your solution to these real-world problems, right now, that happen thousands of times a day, Josh?

Well?

“Finally, if “intellectual honesty” is the issue here, Mr. Meyers should probably disclose his professional connections to the industry when writing on the topic. It strikes me as interesting that so many of those I see defending the payday loan industry online are benefiting personally from it.”

And it strikes me as interesting that so many people who want to rate cap an industry won’t be harmed by it.

Now, “Intellectual honesty” refers to the ability to make an intellectual argument based on facts and not ideology, so my arguments are indeed intellectually honest. I haven’t twisted any facts. I haven’t provided a lot of b.s. to support my position. I used facts and logic.

What you mean to do is attempt to discredit the arguments because I happen to be in the PDL industry.

This, Josh, is known as the ad hominem argument. It means “to the man”.

The simple answer is that my arguments, presented here and in my last article, are based on simple facts, irrespective of who I am or what I do.

If a raving lunatic runs down the street screaming, “The Sky is Blue and the Clouds are White!”, are we to discount his statement? Of course not.

So please put that intellectual dishonesty away and focus on arguing the issues — and the facts.

I await your reply and thank you for doing so.

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