Some rich payday lenders and companies are forging a huge amount in a bid to try to get more respect from Washington. They are trying to shed the name “payday lenders”. They want to be called “Short-Term Loan Lenders.”
To quote from the Bloomberg article:
Firms offering short-term online loans, including Fort Worth, Texas-based Cash America International Inc. (CSH), are ramping up political contributions, hiring lobbyists and asking Congress to largely transfer oversight from states to the U.S. Office of the Comptroller of the Currency. A House committee today will hold a hearing on the proposal, which the OCC itself opposes.
As the $11 billion online loan industry bulks up in Washington, it also aims to shed the “payday lenders” label, according to talking points drafted by Peter Barden, a spokesman for the Online Lenders Alliance.
More information can be found here.
We have some pointers as to why these cash-rich companies want a change in their name.
Payday lending has a bad reputation in the business industry. Everyone right from the legislators to the common man looks at this business as a necessary evil for people who don’t have access to credit. In fact, the criticism of the term payday lending has made some lenders avoid the term completely.
Other than short-term loans, some of the lenders prefer to call these loans “direct deposit advances”, “checking account advances”, “signature loans”, “unsecured loans” etc.
When the purpose is emergency cash requirement, a payday loan does help. But it becomes a bigger problem when the borrower is unable to pay back the loan.
Since a lot of people are unable to pay back the loan, they fall into a debt trap never to come back again. These people tell their stories to people they know, write them online, twit them on twitter or Facebook etc. These stories get popularized. Hence the industry gets a bad name.
Whatever the case may be, the industry has got a bad name.
We think it’s a step to kind of re-brand the whole industry. If people stop saying “payday loans” and start saying “short-term loans” it gives an image makeover to the whole industry. And who knows it will get a better image than it has now.
Another reason is by name itself “payday loan” does not mean anything. A short-term loan defines the real purpose of the loan and the business itself. It makes sense and reminds the person who has taken a loan that it’s meant for the short term only and that it needs to be paid back in a short period.
Some interesting facts: The payday industry is known to contribute millions of dollars during elections and help the legislatures win elections. They play a huge role in the presidential elections as well. Moreover, they have their own pressure groups and insiders in the government who support them if they want something from the lawmakers. And more often than not they get it.
It will be interesting to see if the payday lenders are able to pass this proposal.
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