Many professionals, including communists and a notary public in California, and an attorney in the US state of Missouri, are defending payday lending, even as the industry is under threat from the lawmakers in Washington and other critics. The common complaint is that, payday lending leads to a debt trap. However, there are others who are convinced that these small-dollar loans are the only option for a vast majority of people in the United States, particularly those who have little savings.
The Case in California
A prominent notary public in South Carolina has questioned why every time something actually works for the little guy, there are government bureaucrats who will try to take it away? Cranford T. Rigell wonders if the government understands that there are people out there with real needs, and sometimes these people require help.
He was referring to the payday loan industry, which is increasingly under threat because of the ever increasing government legislation and stricter regulations. At least one columnist in a major California magazine has supported Cranford.
Cranford says most Americans need a little cash almost every month to see them through the next paycheck. He complains that the federal government wants to take it away, leading to a severe cash crunch situation for most families.
He presents his own case as an example. Cranford says that as a Notary Public, he doesn’t have the status to get an on the spot loan from a bank. So he is left with no other option but to get a payday loan. According to Florida law, he cannot take more than one loan at a time, which is good, because it protects consumer interest. He takes small loans once in a while, and pays it back within a couple of weeks.
There are laws in other states as well that protect consumer rights. For instance, in Florida, the loan amount has to be equal to or less than $500 at any time. Also, the fee cannot be more than 10 percent. So there is legislation already. Do we need more legislation and restrictions? Probably not!
No Money for Car Repairs Means No Work, and No Pay
Cranford says he wouldn’t be working if these loans were not available. “How am I going to get the money for car repairs? I wouldn’t have been able to get to work — meaning I wouldn’t have gotten paid”. Sometimes priorities make it necessary to take a payday loan, he adds. Cranford and the millions of others in the state of California and elsewhere in the country are OK with the small fees charged. These small dollar loans cannot hurt you if you are careful about paying back on time.
Of course, there can be many other sudden emergencies too for which people need money urgently, such as pending utility bill payments, guests arriving without notice, rent payment, or medical emergencies that cannot wait. Banks will take their time to give the credit, if at all, so they are quite impractical.
Plus, there is a huge section of the population that is even to this day, scared of the big banks. They would rather shop with their neighborhood store and a person they know personally and meet every day.
The columnist in California even says that not only is a payday loan the best option for the little guy in the state, it is often the only option. Most payday loans are advanced for sums between $300 and $1000. That is too little money for most banks, and naturally they are not interested in making the advance. Whatever alternative proposed has not worked. This leaves a lot of people with just one option, payday lending or quick-cash loans, which many lawmakers are trying to take away.
It Is the Common People Who Will Suffer If Payday Loans Are Shut Down
A few elites in Washington and elsewhere have already imposed strict guidelines and restrictions on payday lending. As a result, the number of payday lenders across the country has come down drastically, sometimes by almost 50 percent in some regions. But they are not satisfied yet. They want to adopt new laws that will end up shutting down the operations of many other legitimate businesses.
Who suffers? The consumers, of course! The little guy naturally!
It is time to realize that people are thinking individuals and responsible citizens. They know what is good for them. That is why a huge majority of people pay back the loan in time without defaults. Absolutely no one wants to stay in debt forever, and the chance of a debt with payday loans is actually minimal as the loaned amount is small.
Cranford T. Rigell signs off by saying, “We are not idiots”!
Do not punish the hard-working people who are trying desperately to make ends meet. There are enough people to punish in the corporate world and others.
The Case in Missouri and Indiana
Robert Swearingen works as an attorney in Missouri. He offers free legal help to the elderly and low-income people in eastern Missouri. Robert has worked with hundreds of individuals who have taken payday loans and says that, “The stories are always the same. These are not loans of convenience. These are loans taken out of desperation”. Without the money, these people will be in a lot of trouble. Banks will almost always deny them a loan. Many of them have poor credit.
Robert says that in his experience, he has seen a percentage of people who take payday loans are not able to pay it back on time, but points out that this is the case with all types of loans. So why single out payday lending, he asks, particularly when there is really nothing to replace it.
But the industry is being threatened, because payday lending is under such a scrutiny that many businesses are shutting down in Missouri as they are feeling hassled. This may not prove to be a good thing in the long-term, Swearingen adds. Many more individuals are likely to be forced to declare bankruptcy. Crime and looting could go up.
Quite a few people agree with this point of view, including Todd Roberson from the Indiana University Kelley School of Business. He is a senior finance lecturer in Indianapolis. Todd says that the fallout of payday lending closing down because of more restrictions could prove to be very severe. We may not be ready for this yet.
For instance, many customers could end up borrowing money from riskier places. Roberson says, “Putting it out of business will simply drive it underground into the hands of gangs, local crime bosses or worse”. Payday lenders, on the other hand, are legal businesses that follow all government regulations. They follow employment as well as financial disclosure policies. Customers can ask for an extension if they cannot repay on time. There are regulators looking into every deal closely.
On the other hand, if you take money from undesirable sources, like criminal elements for example, these people are going to handle a default entirely differently.
Time will tell whether anything can be developed to replace payday lending. But as things stand now, millions of Americans depend on these quick-cash loans, so it would be a huge mistake to create hurdles. The lawmakers should actually make it easier for people to get the money they need, while monitoring and regulating everything.
It is good to have laws against bad practices in payday loan industry. We are also against them, however payday loan is the only way and ray of hope for people who find it really hard to make ends meet. There are millions of them in US. Therefore it must be allowed with good lending laws.