The Pundit will leave the overall subject of John Hughes point in this op-ed up to debate.  What I’m sure of is that his inclusion of payday loans is misguided and his understanding of them is minimal.  Payday loans aren’t offered to live beyond one’s means; payday loan customers use them to meet unexpected needs and in emergency situations.

Hughes also characterizes the rates as “impossible” ($15 on $100 for 2 weeks on an unsecured loan is “impossible?”) and the customers as “unsophisticated.”  Once again we see the paternalistic lack of respect towards and stereotyping of people whose choices the writer doesn’t understand.  I wonder how often Mr. Hughes pays over 1000% APR on an overdraft fee.

That’s the thrust of this Christian Science Monitor story on how to beat bank fees.

Tommy Moore, the Executive Vice President of the Community Financial Services Association of America, has a letter in today’s Christian Science Monitor echoing the favorable comments in this terrific guest column by Tim Miller of the Center for Consumer Freedom from a few days ago:

In response to Tim Miller’s recent Opinion piece on banning payday loans: Critics of the payday advance industry claim to be representing the best interest of the consumer, yet they want to limit the already small number of short-term credit options available. Many of these critics have never taken out a payday advance before, nor ever needed short-term credit, yet they know “what is best” for everyone. Payday advance customers have strong sentiments against the government limiting their access to these advances. They want to be able to make their own financial choices.

Based on the reasons customers choose payday advance, limiting their use would, in most cases, drive them to more expensive and less desirable alternatives that they had previously tried to avoid.

At this time, no one is offering any real alternatives to payday advances. To date, almost all of the attempts to create payday advance alternatives have either been charity-based, required government subsidies, unavailable to the general public, unprofitable, or unsustainable. Hopefully politicians will quit spouting rhetoric and stop ignoring the only people whose opinions should really matter – the customers who use the service and the employees whose jobs are on the line.

Tommy Moore
Alexandria, Va.

 

Tim Miller of Center for Consumer Freedom has a very sensible opinion piece today in the Christian Science Monitor.  From the piece:

One consequence of payday lending restrictions is that they force would-be borrowers into alternatives that are far more costly. Georgia, for example, has outlawed the practice – mistakenly, as a Federal Reserve Bank of New York study indicates.

The study found that bounced-check fees grew by $36 million and Chapter 7 bankruptcy filings rose by almost 9 percent in Georgia after payday lending was banned. What’s worse: Bouncing checks and wrecking your credit rating, or paying a lender $15 for a $100 advance on your paycheck?

Given these facts, it’s clear that those guilty of exploitation are not the short-term lenders, but politicians who are trotting out the poor to score a political victory.

The whole piece is well worth the read.