With the rush to regulate, even ban, that seems to be in the air concerning payday loans, it is all too easy to fail to recognize one simple fact.
Payday loans are an important borrowing option for those who have few others. Furthermore, with a little number crunching, as was done in a fairly recent study, the rates and fees associated with
payday loans can be quite reasonable when compared to the costs of the so-called overdraft protection offered by many banks.
Payday loans are often the only choice available to their primary users, other than rounding up personal possessions and heading out to the pawn shop. The fact is, most of the people using payday loans do not have the option of going to a bank and getting a personal loan to cover an immediate cash need. The standard complaint among lawmakers and advocate groups is the rates and fees associated with
payday loans. The claim is that payday lenders are predatory, and trap their lower income users into a cycle of debt.
Lawmakers and advocate groups that insist that the
payday loan industry needs to be stamped out legislatively are behaving in in a manner that is, at best, a clear demonstration of the degree to which these typically financially comfortable people are out of touch with the needs of ordinary people. At worst, their behavior is insultingly paternalistic, insinuating that those of lesser means are not capable of making their own decisions, such as whether a fee of $15 per $100 borrowed, notably less than the usual bank overdraft fee, is worth the convenience of having it now. In some cases, it is. But, even if it isn't, it is not legislators' and advocacy groups' decision to make.
Payday loans are used because there is a need for them. It would seem that lawmakers and advocacy groups would be making better use of time and money in addressing the economic factors that create the need to use
payday lenders. Until then, they should learn to respect other people's choices, even if they do not agree with them.
Linear Mode
