Joe Thrash: The real facts about payday loan bill
I wanted to respond to Thomas Markham’s recent article concerning the payday loan bill that is being proposed in the Georgia Legislature.
First, I want to fully disclose that I have been employed in the Cash Advance Industry for the past 6 years, and before to my involvement in the industry, I did not have a great deal of knowledge about the service, and even shared some of Mr. Markham’s opinions. But, prior to moving into the industry, I did some in-depth research into the business, and found many of my preconceived ideas, like those presented by Mr. Markham, were both conceptually and factually inaccurate.
First, in respect to Mr. Markham’s views of the typical payday advance customer being poor, welfare recipients, unemployed, and so on. In fact, the typical payday customers are ordinary, hard-working people who simply need some short-term cash from time to time to help cover an unexpected or unbudgeted expense. As required by law in most states where cash advance companies operate, the customers must have a steady source of income and an open and active checking account. Also, loan limits are set by regulations so that a customer is not loaned more than they can conceivably pay at the due date (the proposed Georgia law sets the limit at $750 or 25% of the total monthly income).
Additionally, he charges that the typical customer is “undereducated, who can’t read the fine print that says, “If you don’t pay off this loan next week, there’s an extra late fee charge, equal to one-quarter of the loan.” This is factually wrong. As per the bill proposed in Georgia, as well as in the majority of states where payday advances is regulated by law, it is illegal to charge any additional late fees to a payday advance customer. Also, as a part of the Community Financial Services Association Best Practices for the Payday Advance Industry, and per the proposed Georgia law, if a customer is unable to repay a loan according to the additional contract, that customer will be given the option of repaying that loan over an longer period of time at no extra charge. This is clearly spelled out in section 7-9-1 2 of the proposed law. Please go to www.legis.state.ga.us and look up HB 163 for the actual facts about the proposed law. Mr. Markham also refers to the high fees of the loans. In actuality, as per the proposed Georgia law, the fee that can be charged is set at $15 per $100 borrowed (section 7-9-10, 8.e of the law). When comparing this fee to other potential charges, such as bounced check fees, overdraft fees, or late payment fees, payday advance customers realize that often this is the most economical choice they can make.
The representatives in the Georgia legislature who voted for the proposed law have taken the time to educate themselves on the payday leaning industry, and have learned that it is a viable short-term solution for many people. Payday loans are not intended to be a long-term financial solution. But, for individuals who are facing immediate short-term, low-dollar cash needs, this kind of loan can provide a necessary service that banks just don’t offer anymore. These representatives also understand that right now in Georgia people that need this service are forced to turn to riskier or higher cost alternatives such as unregulated internet lenders or title pawn.
Throughout his commentary, Mr. Markham refers to Payday Lending as “predatory lending business.” A recent report by the Federal Reserve Bank of New York found that payday loans are not predatory, and may actually enhance the economic welfare of households. This report can be viewed at www.newyorkfed.org/research/staff_reports/sr273.pdf.
Payday loans are not for everyone, but they do play a necessary and desired role. These small, short-term loans provide hard working people with little savings and credit alternatives a reasonable and economical option for short term credit to meet unexpected expenses. These loans are many people’s only source of convenient, dignified and understandable credit without the hidden fees or unexpected penalties that are too unpredictable for someone living on a tight budget.
In conclusion, they best way to help hard working people would be to legalize and regulate payday loans in Georgia. Regulation will assure that the service is marketed, controlled and used in a responsible manner. By continuing to ban this option, Georgia consumers are being robbed to their right to make their own financial decisions, and forced to go out of state, or even use other higher cost and riskier alternatives.
Joe Thrash lives in LaFayette, Ga.
To view this article please go to - The real facts about Georgia’s payday loan bill – by Joe Thrash
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