Armstrong Williams in our corner
September 27, 2010 | positive media coverage | Comments (1)He understands free markets. From his column today in The Washington Times:
It may surprise you that these non-bank financial service providers include pawnshops, payday lenders and short-term lenders. They also provide invaluable products such as reloadable debit cards and installment loans. Yet most people’s knee-jerk reaction when they hear the words “payday lender” is to accuse these businesses of predatory lending practices because of the “excessively” high interest rates.
But are they really excessive? One of the most fundamental financial principles states that the greater the risk, the greater the return. In other words, these lenders need to charge interest rates that compensate them for giving money to high-risk consumers — those who have histories of abysmal financial management, not paying their bills or leaving others holding the bag. The default rates are, in fact, excessively high for these businesses.
Comments»
I agree with the fact that these organizations fill a need that the mainstream financial institutions can’t fill. Who else would loan money on demand to someone with bad credit and no collateral other than their job?
In addition this business makes sense from a global perpective as a stepping stone to the financial system in paces where the financial services industry is not as well developed — to wit South Asia and Africa.
To put it simply, expanding the financial services industry to those who can’t participate currently makes cents.