Kim Stevens likes making her own financial choices and eloquently argues why Ohioans should want them too in today’s Mansfield News-Journal.

Here’s a story from Mississippi about a new payday lending alternative.  The Payday Pundit thinks this is great.  The more choices consumers have when it comes to short-term financial products, the better!  However, because you’ve come up with an alternative doesn’t mean you should replace existing products.  Let the market work and let consumers choose which product they like better.  There is one thing in this announcement that makes this pundit think that this new loan will not replace payday loans outright:

There are no fees to participate in the BankPlus program, but a credit check is required, and the credit score affects the loan amount for which a customer is approved. Customers also must complete a financial literacy program before they receive the loan and they receive credit counseling once they are approved

One reason people take out payday loans is because there is no credit check required.  Imagine if you’re a busy person and need money today, something tells me you won’t have time to receive credit counseling before you need the money.

I don’t understand why the anti-payday lending groups can’t wrap their heads around this one. 

Allred said potential borrowers are told twice the interest rate that they will pay, even when it’s 521 percent.

Payday lenders are extremely clear about what taking out a loan will cost.  They have to be, in many states what they tell borrowers is regulated and must be extremely clear.  For CFSA member companies, according to CFSA’s Best Practices lenders need to show borrowers in writing and on big posters in their stores exactly what the terms are.  Matter of fact, studies CFSA has conducted tells us that consumers choose payday loans because it is very clear.

To recap:

Lenders are up front about the terms of the loan.

Borrowers understand what the loan will cost them.

Borrowers still choose to take out the loan.

Anti-payday lending groups are confused, demand that payday loans be banned because borrowers don’t understand the terms of the loan.

 

 

I was at the grocery store last night and took a spin down the bottled water aisle.  I counted over ten different brands of water. TEN! That was just for still water, not fizzy fancy mineral water or ultra pure distilled or raspberry flavored “performance” water…just plain old water that you can get for pennies out of the tap.  Why does my grocery store carry ten different brands of plain old water?  Because consumers like choices, they might like the image that goes with drinking a fancy French fizzy water, they might choose bottled water over a soda or their tap water might taste like bog water (as mine does) and prefer drinking water that has been purified elsewhere.  In the end, no one forces consumers to buy bottled water, but if they want it the option is there.

That’s what Ohioans for Financial Freedom are fighting for.  You don’t have to take out a payday loan if you don’t want to.  There are alternatives, someone with an unexpected expense can take a cash advance on their credit card, ask their employer for an advance on their payday, ask their family for help, they could pawn a valuable item, some credit unions offer loans or they could just go ahead and pay overdraft or late fees.  These are all perfectly good options, as is taking out a payday loan and that option should remain available to those that want it.

A new poll by Zogby International finds that 84% of Ohioans think that credit decisions should be left to the individual while only 17% think the government should be involved.  From the news release:

Only one respondent – or 0.2% of the sample – said they think the state lawmakers should concentrate most on dealing with the payday loan industry – this despite widespread awareness of the effort now underway at the state capital to ban payday loans in Ohio. Nearly seven in 10 poll respondents – 68% – said they have heard something about that effort on at least a bi-weekly basis. Another 30% said they had never heard of the effort.

The telephone survey also shows wide support for the payday loan industry and for freedom for Ohioans in making decisions about their personal finances. A huge majority – 84% – said they believe the individual citizen should be free to make their own decisions about what kind of credit they can use, and 70% said the government should not be in the business of telling adults who have bank accounts that they cannot get a payday loan if, in their own opinion, people feel that payday loans are the best option for them.

Since the editorial board at the Cleveland Plain Dealer is so concernced about what Ohioans think, and the Zogby Poll provides definitive evidence of Ohioans’ thinking, the Payday Pundit expects an editorial from the paper urging legislators to leave credit decisions to individuals.  But, we won’t hold our breath.