Who’s Missing from the Payday Loan Debate?
July 28, 2008 | alternatives, industry | Comments (1)Ellen Seidman of the New America Foundation asks that question in response to the Washington Post piece over the weekend. Her view about payday lenders runs counter to that of the Payday Pundit, but she makes a good point: why can’t state governments work with payday lenders to figure out a workable solution?
According to the New America Foundation it’s time for traditional payday lenders and banks to “come to the payday alternative table. With good, scaleable and sustainable alternatives.”
Payday Pundit is confused. New America wants to eliminate payday lending, but then wants payday lenders to offer “good, scaleable and sustainable alternatives?”
They use Washington D.C. as an example where payday loans have been banned and credit unions are not filling the void (260,000 loans versus a few hundred). And, according to the District’s Department of Insurance, Securities and Banking, some DC residents are now getting their payday loans in Virginia or on the internet.
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Some payday loan customers, who know they are not going to be able to repay the entire amount on their next payday, would be better served by an installment payday loan, whereby the customer signs up at the beginning to repay the loan in installments over several paydays. Lenders could offer installment payday loans at a lower APR than a two-week payday loan, as they wouldn’t have to process individual rollovers (where allowed). Some quasi-legal websites offer installment payday loans, but I don’t think state laws which authorize payday lending provide that flexibility for CFSA member companies.