GMA hack job
May 26, 2009 | Consumer Federation of America, industry | Comments (3)Your blood will boil after viewing this story on Good Morning America. Notice the focus on company “revenue” not actual profits. No mention of millions of satisfied customers. It doesn’t get more biased or ugly. Please go to the comments section and let them know how you feel.
Comments»
THE ANSWER IS SIMPLE.THIS WHOLE PIECE WOULD HAVE TAKEN ABOUT A MINUTE IF THEY COULDNT GET A LOAN.My car broke down,I didnt have the money to fix it,So I started walking,boy am I tired.I didnt have the money for rent,I got evicted,It sure is cold outside.
This segment displays a very common misconception among Americans – that the annual percentage rate (APR) of a loan determines whether it is a useful offering for a consumer. The fact is that it does not. The APR is just a small part of the picture, and from the consumer’s standpoint is basically only useful for comparing loans which he or she has access to.
Unfortunately, due to their poor credit rating, some people can only qualify for short-term or relatively-high-APR loans. If lenders were to loan money to these people at a lower APR, they would lose money. But just because a loan has a relatively high APR, that doesn’t mean that it can’t be an extremely useful offering for many consumers. There are circumstances in which it would be absolutely wise for one person to ask another, “Kindly lend me $20 and I will pay you back $25 in one hour,” even though that would be a 219,000% APR.
What is important is not the APR, but whether the actual cost of the loan, in dollars and cents, is worth the benefit which it confers. And the fact is that payday loans, as costly as they are, are well worth their price for many people, often saving them from eviction, from losing their job when their breaks down and they need quick repairs, from having their power cut off in the dead of winter, or from paying more money than the cost of the loan in the form of bounced check and overdraft fees, credit-card late-payment and overlimit fees, late rent payment fees, utility reconnection fees, etc.
Yes, some payday-loan borrowers get themselves into a debt bind, just as many credit-card borrowers do as well. The fact is that borrowing money, at any APR, is somewhat risky and should only be done after careful consideration. It is not the lender’s fault when someone develops a debt problem – assuming there has been no deception – because plenty of others have taken out the same loan and benefited thereby. Surveys show that the overwhelming majority of people who have used payday loans consider them to be a useful financial tool. See http://www.cfsaa.com/get_the_facts.html
A 36% APR cap would eliminate this occasionally-life-saving useful financial tool as an option for working people by requiring that the loans be offered for far less than the cost of issuing them. Americans should not have this choice taken away from them by legislation based on misconceptions, and furthermore it is a violation of freedom of commerce for the government to tell independent merchants or service providers how much they can charge – or to tell consumers which products or services they may avail themselves of. Such authoritarian controls are invariably counterproductive. I hope those calling for interest rate caps will reconsider their position and show a little respect for freedom in America.
Noticeably the APR of Bank Overdrafts, Utility Reconnection Fees, ATM Fees and Credit Card Late Payment Fees were left out. I guess they are okay. It is perfectly fine for Banks, Utility Companies and the like to hit people with fees but we as paydaylenders are bad guys and gals? Media sensationalization of course, in this piece from “Good Morning America.” The show should be renamed. “Good Morning America, Time to See How Well we Can Pull The Wool Over Your Eyes.”