The rhetoric in favor of banning payday lending doesn’t seem to acknowledge the research vindicating the service, any more than it acknowledges the ability of adults to make debt-management decisions for themselves.

I think that there is need for increased consumer protection. And I’d like to see, but I’m not interested in seeing a prohibition,” said Assemblywoman Liz Wolfe.

To see poor journalism at its finest, watch Michael Finney, from Sacramento’s KGO ABC 7,  and the anchors chit-chat before and after the story.  Their comments demonstrate they have not only never used a payday loan, but did not take the time to speak to any customer who had.

“The Center for Responsible Lending and other so-called consumer advocacy groups rely on shoddy research in stirring gender, racial and class sensitivities to make the case against payday loans, as they did during their successful crusades in Georgia and North Carolina to run payday shops out of business. Though they claimed that the elimination of payday loans saved Georgia residents approximately $154 million per year, that claim was refuted by a Federal Reserve report (pdf) indicating that consumers ended up paying more through overdraft bank charges and late fees. Critics of payday loans are content to ignore that the mass of payday borrowers are middle-income, educated consumers.”

Terri goes on to oppose “big brother” restrictions on payday lending. 

Despite high fees, people continue to use payday lenders with some frequency. Fool me once, shame on you; fool me eight or nine times, and clearly something else is up. It might be easy to accuse the firms of taking advantage of people and earning unfairly high profits, but if profits are so high, why hasn’t there been a mad rush by the very competitive banking industry to provide these services in underserved neighborhoods? Given my personal financial institution’s predilection for hidden fees and what would seem to be unfair charges for even simple services, I wouldn’t chalk it up to an ethics issue. 

He goes on to advocate competition as the best answer to payday lending.  That’s something the industry has said for years.  Competition drives prices down and serves consumers best. 

Memo To Mainstream Media

“If you want to constantly attack payday loans, then abandon any pretense to journalistic objectivity. The articles recently published about this matter, all of them vilifying the practice of payday lending, fail even the most basic standards of decent reporting. Where are the testimonies – yes, such accounts readily exist – from people who need these short-term loans? This evidence in support of payday loans, narratives from people of diverse economic backgrounds (additional memo to MSM: payday loans are a source of relief for individuals of all incomes), never seems to make it into articles from, say, the New York Times or Washington Post. The reason: the proverbial media establishment wants to destroy payday lending. Save that agenda for the editorial page. In the meantime, reporters need to uphold the standards of their profession — which means writing balanced pieces that respectfully offer data from the other side. And here’s another “radical” suggestion: newspapers should spend less time on this blatantly political cause, and focus their energy on some genuinely incompetent financial institutions. A crazy idea, I know.