Wise words in the Bemidji Pioneer

Legislators judging two-week payday loans by an annual percentage rate standard is as senseless as comparing a hotel’s nightly rate to a 12-month apartment lease (“Predatory lending a debt trap for workers,” April 1). Is a hotel a “predatory hotel” because it charges $154 per night? That’s $4,620 per month, or $56,210 per year! You can rent a studio apartment in Bemidji for about $500 per month. So, using the same price cap proposed for short-term loans, the $154 room rate should be set at a maximum of $16 per night.

A $16 price limit wouldn’t be a ban, but it’s hard to imagine many hotels staying in business with that kind of restriction. Short-term payday loans are no different: the suggested 36 percent APR limit translates to a $1.38 fee for a two-week loan of $100. The limit effectively shuts down the short-term loan service business. But that does not solve the borrower’s problem of needing a loan. It does however leave them with the traditional more expensive alternatives, including paying fees for bounced checks.

Tim Miller, Center for Consumer Freedom, Washington, D.C.

In an op-ed in today’s Des Moines Register, Tim Miller of the Center for Consumer Freedom, writes:

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.

That’s from Tim Miller at the Center for Consumer Freedom in a piece in California’s Press Enterprise newspaper.  Also from the piece:

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.

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.  

According to a new poll by Center for Consumer Freedom, only 10% of Ohioans say they would make loans at the 36% or 28% rate cap proposed by Ohio legislators.      From the news release:

When asked how much they would charge a complete stranger who wanted to borrow $100 for two weeks, just nine percent of respondents said $1.50 or less. Over 80% of respondents would still be unwilling to make the loan at $15 or less, the common rate for a payday loan of that size in Ohio.

Anyone wanting to learn more about the survey should contact Tim Miller,  Center for Consumer Freedom, at 202-463-7112 or .

So says Tim Miller of Center for Consumer Freedom in today’s Baxter Bulletin out of Arkansas.  Money quote:

“Borrowers are best served when they have more choices to pick from, not when politicians eliminate what is for many their only option.”   

The Payday Pundit has been making this point over and over.  Payday loans are an option for consumers facing unexpected expenses.   The payday lending industry has always said that  competition is the best way to keep costs down.  

Tim Miller of the Center for Consumer Freedom has a great response in the today’s Capital Times to a “one-man smear campaign on the payday loan industry” by a reporter at the paper:

Dear Editor: Dave Zweifel’s one-man smear campaign on the payday loan industry is as misguided as it is ill-informed. Zweifel has spent his recent columns assaulting an industry whose worst crime is providing another option for borrowers in need of short-term assistance.

Research shows that when politicians respond to the calls of overzealous interest groups (and apparently columnists) to eliminate payday lending, borrowers are forced to turn to more expensive and less desirable options. Economists with the Federal Reserve Bank of New York found that after North Carolina banned payday loans, those who were experiencing financial stress turned to bounced checks, bankruptcies and delinquent bill pay.

Zweifel’s personal opposition to the industry doesn’t change the fact that consumers are better off when they have more options to choose from. Taking away these necessary options will only leave the borrower stranded in debt.