This latest piece from the Center for Consumer Freedom also says:

As industry defenders have pointed out, getting a payday loan is like taking a taxi home from the airport: It’s not the most economical option available, but it’s convenient. Would anyone say taxi drivers are “predatory” because it’s cheaper to rent a car?

Is this so hard to understand>

The UK’s Guardian reports that consumers in Great Britain are increasingly being targeted by firms claiming to offer credit help.  These firms are offering expensive “debt solutions” that are actually turning a profitable dime for the companies.

An unprecedented number of firms are targeting people in debt by claiming to offer free ‘advice’ on their money worries, say debt charities.

The Bankruptcy Advisory Service, a genuinely independent debt advice service, says it is seeing the ‘sharks’ emerging at a rate of about 10 a week. ‘A lot are internet based and claim to offer people help with their money worries, when in fact they are pushing them into inappropriate and expensive debt solutions,’ said Joanne McGillan of the BAS.

So goes the adage: All that glitters is not gold.  These problems in the UK seem just as likely to appear in the US.  That’s why it makes no sense to me that legislatures are attempting to shutdown what is truly a sensbile option for some people.  Payday lending stores operate under a simple straightforward fee based system that is easy for the consumer to understand.  They even display in large print APRs - a measurement that really shouldn’t be applied to these sorts of loans. 

At the very end, the article seems to imply that all payday lending is bad.  It jumbles online lenders with regulated and unregulated and US and foreign companies.  But the bottom line seems to me to be that people should have clear and honest choices.

… And we shouldn’t automatically trust everyone that purports to want to help.  In reality – they can be the real sharks.

Cameron Huddleston of Kiplinger had some great advice on how to get an emergency fund started.  Her own story proves that sometimes unbudgeted expenses can get even the most financially savvy of us.

In my case, I had a surprise tax bill. I got a refund the previous year, so I didn’t expect to owe the IRS — especially not close to $3,000. Plus, my husband and I had been paying down high-interest debt. That left our account balance pretty low at the time our accountant finished our tax returns — only one week before the filing deadline. To top it off, I had a quarterly estimated tax payment due at the same time.

So I wiped out my account to pay Uncle Sam and relied on birthday cash from my mom to buy groceries until my next paycheck arrived. It was a terrible feeling being broke — even if it was just for a few days.

From Bloomberg, “Foreclosures in Military Towns Surge at Four Times U.S. Rate.”

Thanks to Free Market Lending for the commentary….

Interestingly, CUNA the Credit Union National Association somehow used the study as a way to try to bash payday lending, despite the 36% APR cap on payday loans to members of the military and their family. 

If anything, this shows at least a correlation suggesting the opposite. The federal government capped the rate on short term credit to members of the military, lenders stopped providing short term credit to military members , and now foreclosures are higher.

Very interesting. 

Looking over the month’s media coverage of payday lending the Pundit came across this article from Ohio and was incensed afresh by the sheer stupidity of the content. 

Springfield, Ohio — As payday lending stores promise to close, alternative loan products can aid consumers.
 What a wonderful thing to finally consider. 

Cash America, which runs Cashland and Cash America Payday Advance, announced it will close nearly all of its Ohio stores in response to state legislation regulating interest rates and other practices.

It’s not known yet whether that will include the Springfield stores, a company spokeswoman said.

Several other companies testified during hearings that the legislation would cause them to shut their doors.

The pending legislation includes creating a program to offer incentives for nonprofits and banks to make small loans, said Tom Allio, chairman of the Ohio Coalition for Responsible Lending.

Competition in the short term market is more than welcome – but why do these banks and non-profits need an incentive?  Doesn’t this just cost the taxpayer?  Isn’t it tidy that a coalition that featured banks and credit unions advocated and achieved legislation that gave THEM “incentives”  to offer payday loans?  Why haven’t these groups – who advocated that payday loans be regulated out of existence – entered the market before?    If they can offer something better… why don’t they?

Consumers also can turn to credit unions, he said.

 I wonder what credit unions offer…

“That’s a much more affordable product,” Allio said.

R-E-A-L-L-Y…

International Harvester Credit Union offers a payday alternative loan with an 18 percent annual percentage rate and a $35 annual fee for $250, or $70 for $500.

So, that translates to a fee of roughly $15 per $100 if you are looking for a payday loan.  I wonder what the average fee is for a payday loan.. oh wait $15 per $100 loaned.

The credit union began offering the loans about four months ago and has 50 to 60 outstanding, President and CEO Jim Kitchen said.

That seems odd.  Considering that hundreds of thousands of Ohioans have use payday loans, I wonder why the low number.

“Our members were getting strapped by going to too many payday lenders,” he said.

Wright-Patt Credit Union offers a similar product.

Both have requirements, such as membership for 60 days and a verifiable income.

So, not only are the fees the same… but there are actually even more difficulties to getting these loans?  Is there a fee for membership?  What happens to the people of Ohio who aren’t a member of these credit unions?  And does this raise questions about the intent of this legislation?  It seems that credit unions have a lot to gain.

Wright-Patt has offered its stretch pay loans for about seven years and has expanded it to 40 credit unions in five states, said Jeff Carpenter, vice president of membership and development.

About 8,600 loans totaling $2.4 million are outstanding.

The loans require repayment before another one can be taken, Carpenter said.

“It’s not going to get you stuck in it,” he said.

This goes back to the cycle of debt argument that critics use.  That argument is simply not valid.  Under CFSA’s Best Practices, any customer who cannot payback their loan when due has the option of entering into an extended payment plan, allowing them to repay the loan over a period of additional weeks. This option is provided to customers for any reason and at no additional cost. In most of the 37 states that regulate payday lending, rollovers or loan extensions are either limited or prohibited. In states without limits, CFSA members limit the number of rollovers to four. It is not possible for someone to rollover an advance for an entire year or to accrue the kinds of fees claimed by payday lending critics. Finally, research shows that many people who bounce checks and use overdraft protection often do so at a higher frequency and at a higher cost.

Update: And this story from the Tribune Chronicle on the fallout from this terrible legislation explains why I am seeing flames.

Update 2:  In a similar vein, the author of this piece clearly has his heart in the right place but isn’t doing the right math when it comes to comparing payday loans to their alternatives.  How does one not include credit union membership fees and other stipulations like forced savings accounts etc when trying to compare these alternatives with payday loans?

More from paydayfacts.org…

“There are many myths that have become part of our culture. Some of these are propagated by books and TV while others are told around campfires. Since the advent of the Internet, a new forum for the dissemination of tales designed to frighten, intimidate, and bewilder has proven to be a double-edged sword. On the one hand, well-supported facts and information is just a click away, but on the other hand, lies and half-truths have never been spread as fact more rampantly.”

Creative way to compare payday loans to the alternatives from our friends at paydayfacts.org…

From an editorial published in Canada’s Owen Sound Sun Times:

Payday loans are again in the news. I have just watched some socialist do-gooder blithering on about how legislation is needed.

…Legislation resulting in the payday loan companies not being able to earn enough to justify the risk they are taking will mean their closure and those wanting to make a short-term loan will have to borrow from the guy on the corner. The one who will lend people money accepting the fact that they have two good arms as collateral. How are all the do-gooders going to feel when these borrowers start getting hurt, or worse?

Smart words from our friends up north.

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