The Florida Attorney General’s office has announced that they will begin an investigation of five prepaid card companies (First Data Corp, Green Dot Corp, Account Now Inc, NetSpend Corp and Unirush Financial Services LLC) looking to find “deceptive and unfair practices”.

“Failing to disclose fees is essentially stealing money from consumers,” Attorney General Pam Bondi said in a statement.

Lengthy piece by Miami Herald reporter ran on Sunday.  From the story:

Annualized, payday loan interest rates may be as much as 300 percent or higher, drawing the ire of consumer advocates and earning the industry labels including “legalized loan-sharking,” “financial apartheid” and “predatory lending.”

But the cost is up front and transparent, Fulmer said.

Customers “see our product as a cost-competitive alternative. You often hear critics talk about exorbitant annual percentage rates, but you have to look at an apples-to-apples comparison,” Fulmer said. Credit card late fees interest rates and overdraft fees can be far more expensive on an annualized basis, he said.

Exactly.   For many people, a payday loan is the right choice when facing an unexpected expense.   If a pawn loan or credit card is a better choice in a  particular situation, the consumer is the best person to decide that.

This story about the services that garner the most consumer complaints in Florida includes overdraft protection, but does NOT include payday loans.

From the local Ocala, FL paper:

The recession has hit Marion County’s pawn businesses the same as most other industries. Porter’s profits have been down 15 percent to 20 percent since the recession began.

“People walk up to me all the time and say, ‘You’re in the pawn business, it must be booming,’ ” he said. “I think they don’t understand the pawn business.”

To keep the business afloat, Porter said he must be more selective as to what he buys for resale or what he’ll make loans on.

“Average doesn’t sell that well lately,” he said. Just as some people need money and are more likely to pawn items, potential customers are feeling the financial pinch themselves and are less likely to buy.

Check the headline of this story our of Florida.   The fact that payday lenders haven’t lent to military personnel for more than a year doesn’t matter to some reporters.

The media is constantly talking about the payday lending industry’s  ”huge profits.”  In an oped today, D. Lynn DeVault, President of CFSA, takes the “huge profits” lie head on:  

When compared to traditional banks, payday lenders’ profits are measly. The average profit margin of the top 10 banking holding companies in the United States is 18.5 percent. Traditional banks earn far higher profit margins on late charges, bounced checks fees, ATM fees, over-draft protection, and credit card balances than what payday lenders earn on their regular fees. The bank profits come from charges most people don’t think twice about paying nearly every day. But again, no one is accusing the traditional banks with overcharging Americans.

Something else that may surprise people is that the Self Help Credit Union, which is affiliated with The Center for Responsible Lending and meant to be an alternative to payday lenders, makes 20 percent profits on revenue. That is double what most publicly traded payday lending companies earn as profits. That’s right, an enterprise affiliated and endorsed by the biggest critic of the payday lending industry earns twice the profit from their short-term loans as payday lenders do. No wonder the center wants to put payday lenders out of business.

To help us better see what is right in front of our noses, consider this: payday lenders only make, on average, around $1.28 on the $15 fee they charge for a $100 two week loan. This is less than a 10 percent profit from their incomes. That means more than 90 percent of the fees people pay to payday lenders are used for overhead costs such as rent, payroll, and health insurance and benefits for the employees.

Tim Miller from Center for Consumer Freedom in today’s Fort Myers News Press:

So what if the payday loan business isn’t the most popular or the prettiest niche of the financial services industry. For millions of customers, its availability means that the car gets an urgent repair, a critical check doesn’t bounce, or the electric bill gets paid. Considering the borrowing alternatives, a $15 flat fee for a $100 two-week cash advance doesn’t seem like such a bad deal.

Eliminating a major short-term credit option for financially stressed adults is hardly an act of mercy. We should be helping Americans find more debt management options-not taking them off the table.

As always, Mr. Miller has a way with words.  

The Center for Consumer Freedom’s opinion piece we blogged about yesterday was picked up by another newpaper today.   It makes a strong case against government paternalism, and we’re glad to see newspapers devoting some space to this argument.