The Pundit would like to take this opportunity to convey his respect for Speaker of the S.C. House of Representatives, Bobby Harrell.  While he may have lead the charge on a new S.C. regulation on the payday lending industry, he also took a moment to profess respect for consumer choice, and for that I applaud him.  News and Press Online quotes Harrel:

“While there are some people who wanted to see us ban this industry or regulate it out of existence, clearly there is a demand from consumers for this particular service.”

Ah, such rationality and respect–it’s a breath of fresh air.

An interesting piece on Customer Service Agents at credit card companies is up on CNN.com right now.

These former CSA’s allege that they were told to push people to take out more credit than they needed and rushed through the details.

CFSA member companies are required to post in large print and explain to customers the terms of each loan they make.  Why aren’t credit card companies held to more stringent measures?  Afterall, credit history is becoming more and more important in the US.

What if you don’t have either until payday?  This is where a payday loan would come in handy, but the Fond du Lac Reporter doesn’t even see it as an option.

If your credit is poor and you can’t get a credit card and you rely on debit you can quickly get into trouble

Today, most banks will approve even the smallest debit card purchase — then hit you with a fee of $35 or more.

Yet we don’t hear howling about that kind of predatory lending….

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

Consumer Federation of America, Consumers Union and the National Consumer Law Center have given two more states failing grades for offering choices to consumers.  Illinois and Missouri received straight F’s for having a multitude of short term credit options available to consumers.

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.

Boston’s National Consumer Law Center and Washington’s Consumer Federation of America give the Bay State two F’s for giving their citizenry financial choices.  There is something very wrong with this picture.

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.

Ohio Chamber of Commerce Backs  

Ohioans For Financial Freedom

To Keep Jobs and Consumer Choice

COLUMBUS, OH – The Board of Directors of the Ohio Chamber of Commerce has given its support to Ohioans For Financial Freedom saying imposing overbroad government regulations is not the way to revitalize Ohio’s economy.

“The Ohio Chamber champions free enterprise and economic competitiveness and we believe HB 545, as passed by the Ohio General Assembly, runs counter to our mission”, said Andrew E. Doehrel, president and CEO of the Ohio Chamber of Commerce.  “This new law, if not reined in by Ohio voters, will drive an entire industry and 6,000 good-paying jobs out of our state.”

If HB 545 goes into effect it means the loss of nearly $300 million to Ohio’s economy including $172.6 million in annual employee payroll, benefits and payroll taxes, $76.8 million lost in rent revenue to landlords across the state, and $23 million lost in advertising vendors. In response to this legislation, most of the major payday lending companies have announced they will close stores in Ohio putting as many as 6,000 jobs with benefits in jeopardy.

 

“As we strive to turn around our economy we must allow the free market to meet consumer demands and facilitate the creation of much needed jobs”, said Doehrel.

 

With 1,600 stores in the state, consumer demand for short-term credit is clear. Payday advance fills a need not met by traditional financial institutions and is a convenient, less costly option for short-term, unsecured credit.  Removing access to reasonably-regulated storefront payday lending will force consumers into more expensive, and possibly even less-desirable, alternatives. 

 

Ohioans For Financial Freedom is working to repeal section (3) of HB 545 offering consumers more lending options.

 

Founded in 1893, the Ohio Chamber of Commerce is Ohio’s largest statewide business advocacy group. The Chamber works to promote and protect the interests of its members – large and small – while building a more favorable Ohio business climate.