Friday, November 16, 2007

This "Kill The Payday Lenders" Stuff Has Gotta Go

Whatever happened to just running an honest business with intent to make a profit? Isn't that part of capitalism?

Well, it is...as long as you're not a payday lender.

I don't understand why people want to ban payday lending, or cap their interest rates at a set percentage. Simply put, there isn't a very valid argument for this.

This op-ed at The New Dominion makes me laugh. To quote this person...

It’s incomprehensible to me how any company can be so unconscionable as to charge $15 in interest per pay period, even when one is paid weekly, on every $100 borrowed. Talk about usury!

So that means they're only making $15 gross for every $100 lent if a customer pays them back on time. Considering you have employees to pay, office space to rent, and utility bills...that's not really a lot of money per customer. To put it in perspective, if I'm a payday lender, and I lend out $25,000.00 in payday loans, and all of my customers pay me back on time, I make a gross profit of $3,750.00. Let's remember that lending money to people is a risky business, as you don't know that they're going to pay you back.

Plus, IT'S ONLY $15!!! Geez, that's 1 less case of beer, or 3 less of those $5 scratch-off tickets, or 2-3 less extra value meals at McDonalds!

Where the added profit comes in is regarding the people who are irresponsible enough not to make a payment.

Now, if you have a legitimate reason/hardship as to why you cannot repay your debt, that's perfectly understandable, and there should be a system in place to work that out. However, many times, people run to payday lenders because it's quick and easy cash, and don't plan on budgeting for repayment.

But then again, is the inability of the customer to budget their money for repayment of a debt the fault of the lender?

Unlike many people who pass judgment on payday lending, I've actually USED payday lending on more than one occasion. Life throws you curveballs, and sometimes you don't have the funds available at that moment. I always knew that, when I got the loan, I would have to pay it back...and I budgeted accordingly. Sometimes, that may lead to taking out a smaller loan when you repay the first one, and you "stair-step" yourself back into a normal budget. It worked for me, and I can assure that I am not financially affluent by any means.

Stephen Winslow, whom I agree with on many issues, used to run a payday lending store. Now, he rails against the industry as some kind of source of monetary evil. He likes to use the fact that he had seen a couple of his customers go through bankruptcy, and one couple get divorced, and he blames payday lending for it.

Personally, I believe that if you're declaring bankruptcy or getting a divorce, an unpaid payday loan is not the real source of your problems. Your financial or marital life was probably struggling before you took out the loan.

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