Payday Loans - Bane or Boon?

People view payday lenders in two ways; you either like them or hate them. Those who are opposed to them believe that they are only out to take advantage of low-income families. They argue that the high interest rates charged on the loans are meant to keep the borrower in debt. Consumer advocacy groups such as Arkansans Against Abusive Payday Lending (A.A.A.P.L.) are pushing for legislation, at the state and federal level to regulate payday lenders. They want the laws to put a ceiling on the interest rate a lender can charge as well as allowing borrowers to negotiate for better payment plans once they are unable to pay back the loans. Players in the industry are fighting back they launched a media campaign to educate and to cultivate a better image. Lenders believe that they perform a vital service to the community; the payday industry is worth $ 40 billion a year.

If there are businesses that can offer short-term loans at a cheaper price than payday lenders, industry lobbyist Darryl K. Dever has a message for them: Bring it on.
“Bring the competition into the marketplace. You could do that today,” he said. “It’s not there because it’s a difficult product.”

Standing next to Dever during a debate yesterday, Bill Faith had a different opinion. A leader of the Ohio Coalition for Responsible Lending, he would rather see the two-week payday loans replaced with small-loan options that allow borrowers to repay over a few months.
“Someone who needs $300 today in such a desperate way that they go to a payday lender is not going to have an extra $345 in two weeks,” Faith said. “(Customers) want more affordable options and ways to get out of payday loans.”

Sparring at a luncheon sponsored by the Columbus Metropolitan Club, Dever and Faith foreshadowed what is likely to be a lively legislative debate over a pair of payday lending bills. In the past 11 years, the industry in Ohio has grown from 107 stores to 1,600.

One bill would cap annualized interest rates at 36 percent (down from 391 percent), which Dever said would kill the industry. The other would allow some customers to enter extended payment programs, which Faith said is inadequate.