“Myths will alway exist”
February 6, 2009 | Fort Worth Star-Telegram, Texas, industry, industry critics, media coverage, positive media coverage | Comments (1)But if you read this oped written by an executive at CashAmerica, you will learn the truth about payday lending:
Many short-term critics don’t use the product, so can they adequately speak for our customers? Yet, they attack the industry and hype a triple-digit annualized percentage rate (APR).
No one applies for yearlong, short-term loans. Actually, Cash America limits its customers to four renewals annually, so an APR like that is impossible to actually realize.
Speaking from experience, most customers facing financial emergencies use short-term loans wisely. A short-term loan is a viable solution when offered by reputable lenders like Cash America. We fill the void banks created after they stopped offering small-dollar, short-term loans years ago.
Our opponents believe prohibiting the product will “help customers.”
This is a fabrication. In reality, imposing rate caps of 36 percent APR eliminates a viable credit option. At that cap, the permissible charge for a $100 two-week loan is $1.08, which makes it impossible to cover the cost of paying our employees and operating our stores — adding even more numbers to the unemployed in Texas.
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In my opinion, the legislators are just covering up their own incompetence with regards to regulating the payday loan industry. How many people in state government have ever taken a payday loan? The problem is that they are not ‘middle class’ people and they don’t understand the product. Instead of taking the time to understand the product and coming up with viable regulations, they decide that its best that they put in a rate cap that puts lenders out of business (some are even ignorant enough not to believe that!).
Their lack of understanding causes weak oversight and allows some lenders to use abusive lending practices (such as charging excessive interest). If they actually did their homework, stopped looking down their nose at a business they hardly understand (and its customer base), and worked on a more universal approach to regulation, they would do the business and the public a great service.
It is the state governments, not the lenders, that are to blame for the controversy over this essential product for the public. Anyone who says otherwise has either been raked over by a non-reputable (poorly regulated) company or has never had the need to look for a short-term loan.