Comment of the Day
April 23, 2010 | federal legislation, industry | Comments (2)I very much doubt that “over 60 percent of payday loans go to borrowers with 12 or more transactions per year and 24 percent of payday loans go to borrowers with 21 or more transactions per year.” But whatever the percentages are, prohibiting such people from exercising their freedom of choice might do them more harm than good.
What would definitely help would be if payday lenders could also offer short-term installment loans and, for those who qualify, long-term installment loans. Not only could installment loans be offered at a lower APR but they would also save such customers the stress of repeated trips to the store.
Nevertheless, the traditional payday loan still would be the best choice for many people. Short-term loans save consumers money because, despite the relatively high APR, interest is only paid for a short period of time. Short-term loans also encourage frugality as borrowers are reminded of the need the repay the loan soon, whereas long-term loans which only require small payments tempt people to have several loans outstanding at the same time. That is why so many people have multiple credit cards and end up having to file for bankruptcy.
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This comes from the CRL who only reported volume in terms of loans. The 24 percent number is loan volume. So what percentage of actual borrowers do this? Less than 6%. See reports published by the Florida regulator. CRL does not want to talk about borrower usage only loan volume. You won’t find them saying that 28% of borrowers only take out one or two loans a year.
I wonder what percentage of ice cream sales go to people who are obese, or what percentage of lawyer fees are paid by people who spend over $10,000 a year? Is that the can of worms Senator Hagan wants to open?
The critics keep talking about fairness, so if payday loan customers are treated in that way shouldn’t everyone else be as well? Let’s track everyone’s purchases so nobody can overspend or buy more of anything than the government decides is good for them.