Installment lenders in today’s Kansas City Star rightly point out that a proposed ballot initiative in the state amounts to an all-out assault on consumer credit that would impact banks, credit unions, and others. We seen this before — righteous, but misguided efforts to help borrowers actually drive them to more expensive and credit-damaging alternatives…

“Removing installment loans as an option for borrowers will force them to look to black market sources or unregulated Internet lenders for the money they need. This must not happen. If Missouri must deal with payday lenders, it must do so in a significantly more targeted way.”

KC Star editors apparently don’t understand that a 36 percent APR cap would eliminate short-term loans in Missouri. Still, some readers understand the provision would deny credit to those who need it most, and that the costs of payday loans are reasonable compared to short-term alternatives…

Continued coverage from the WoonSocketPatch.com.

According to the article:

CRL estimates that $3 million per year is being sucked out of the Rhode Island economy by nationally run payday loan companies, such as Check ‘N Go of Ohio and Advance America of S.C.

IHS Global Insight conducted a comprehensive study analyzing the economic impact of the payday loan industry nationally and in states with storefront locations. Findings illustrate “measurable and significant” economic benefits to local economies directly through employment, compensation and taxes, as well as through indirect and induced relationships with suppliers and other industries.

SOME KEY FINDINGS:

The industry contributed over $5 million to Rhode Island’s gross state product (GSP) in 2007.

The payday lending industry supports 74 jobs1 in Rhode Island, including 42 people directly employed in13 storefront locations.

• The industry indirectly created another 10 jobs in supplier industries.
• Payday loan store and supplier industry employees induced the creation of 23 jobs through the purchase of goods and services using earned wages.

In Rhode Island, the total labor income impact from the payday loan industry is nearly $3.2 million:

• Through direct employment, payday loan stores contributed $1.7 million in labor income.
• Suppliers to the payday lending industry contributed $480,000 in labor income as an indirect result of the revenues generated by the payday loan industry.
• $1 million was generated from the wages of payday loan store employees and supplier industries’ employees as they were spent in Rhode Island’s economy.

A bill moving through Rhode Island could restrict access to credit for consumers in the state.

Part 1 of a story coming from the WoonSocketPatch.com:

A House bill (H5562) sponsored by Rep. Frank Ferri (D-Warwick) would repeal payday lenders’ special exemption, cap payday loans at a 36 percent annual interest rate …

Evidence shows that states that have seen restrictions, such as interest rate caps, access to short-term credit has all but vanished. Such a prohibition would drive licensed and regulated entities like CFSA members out of the marketplace and drive consumers to higher cost providers, many of which are unregulated and unlicensed.

The best way to protect consumers is to ensure that they understand the actual cost of the loan. And when you take a look at the other short-term products out there, consumers can make an informed decision for themselves. A payday advance compares favorably to many consumer alternatives, even when expressed as an APR for two-week terms:

• $100 payday advance with a $15 fee = 391 percent APR
• $100 bounced check with a $28 overdraft protection fee = 730 percent APR
• $100 credit card balance with a $35 late fee = 913 percent APR
• $100 bounced check with $60.47 Non-sufficient funds and merchant fees = 1,577 percent APR
• $100 utility bill with $46.16 late/reconnect fees = 1,203 percent APR

Missouri wrapped up talks this year on payday lending, but it will resume next session.

A House-approved payday lending bill is dead for this year, but two senators — one Republican and one Democrat — say they plan to write a much tougher measure in time for next year’s session.

A North Carolina newspaper goes all Shakespeare in a diatribe attempting to justify why payday loans should remain outlawed in the Tar Heel state. To allow consumer freedom or not allow consumer freedom, that is the question.

… N.C. General Assembly is considering House Bill 810, which would relax restrictions on “consumer finance” companies that include predatory and payday lenders.

 

The Missouri House of Representatives will likely vote this week on restrictions for short-term lending, according to this newspaper article. There are some in the state that still want to ban payday lending, but this bill sponsor says that’s not the aim of this legislation.

Bill sponsor Rep. Ellen Brandom, R-Sikeston, said the bill would help curb abuses without putting the industry out of business.

Some folks in Rhode Island are trying to compare payday lenders to banks, although banks don’t offer small dollar loans.

Pay-day lenders in Rhode Island would have to charge the same interest rates as banks and other financial institutions under a proposal in the Rhode Island General Assembly.

An op-ed writer sharply attacks the payday lending industry and gives advice on how to ban the industry, including this gem:

3. Find a poster child for the payday industry’s ills.

And ignore the thousands of satisfied customers who use short-term credit services to their advantage. It’s rare that you see a newspaper so boldly broadcast its bias and give details on how stories are slanted.

A St. Louis op-ed writer just doesn’t get it:

The payday loan industry in Missouri claims it is providing a service, making short-term, unsecured loans to people who otherwise would be unable to get credit. But states where interest rates have been capped at 36 percent still have people who need short-term loans. They get them from responsible lenders who are happy to operate under the new caps.

Actually, in states where payday loans have been banned have seen spikes in unregulated lenders and other negative affects.