Payday loan bill deficient
Sun, 01/17/2010 - 00:33
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Send to friendPayday lenders are cranking up a new initiative in the state Legislature to usurp what voters mandated in 2008.
That is, that the state will allow lenders to charge a maximum interest rate of “only” 36 percent to anyone who wishes to take out a loan.
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If the citizens of Arizona have affirmatively voted for something, then why are their representative trying to second guess? Is Arizona that much better now that payday loans are no longer allowed in our state?…
With all the uproar of the payday lending lawsuits, many forget that there
are a lot more to these loans than just giving cash to individuals with high
interest. Fastbucks [1] is being charged with making unconstitutional loans
and is being prosecuted by New Mexico. Often the people using these lenders
services are unable to get financing anywhere else and are considered high
risk. By being labeled as high-risk, they’re a liability to lend to, and if
the loan organizations don’t get their money back they’ll go out of business;
so often the interest rates are only to sustain their company. Interest rates
are high for this reason, regardless of why someone is actually going to a
payday lender.
[1] http://personalmoneystore.com/moneyblog/2010/06/23/fastbucks-new-mexico-attorney-general/
IF THE GOVERNMENT REALLY WANTS TO HELP THE PEOPLE WHO SEARCH OUT THESE PAY
DAY LOANS THEY SHOULD REQUIRE THE BANKS WHO PARTICIPATE IN THE FDIC TO OFFER
SMALL LOANS OF $500 OR LESS TO THE PUBLIC.MOST ALL OF THE PAYDAY LOANS ARE
$300 TO $500. THE PAY DAY LOAN OFFICES KNOW THAT THE BANKS WILL NOT LOAN SUCH
A SMALL AMOUNT TO A CUSTOMER SO THEY END UP BORROWING FROM THE PAY DAY LENDER
AT A HIGHER INTEREST RATE. IF A BANK OFFERED THIS TYPE OF SMALL LOAN WITH AN
INTEREST RATE COMPARABLE TO THE PERCENTAGE CHARGED FOR AN INSUFFICIENT CHECK
CHARGE THE PAYDAY LOAN COMPANIES WOULD LOSE MOST OF THEIR CUSTOMERS.
Although I mentioned previously the “Pay Day Loan” businesses are nothing
more than legalized “loan sharks,” that is what they are. I say this because
the dictionary defines the term “loan Shark” as a lender of money for illegal
interest rates. I correct myself by saying pay day loan businesses are legal
and their interest rates are legal. Maybe that the real problem is that our
legislators set legal limits on high interest rates charged by the businesses
when these high interest rates should be illegal. The same problem exists
with credit cards. Who is looking out for whom? Is that why we pay our
representatives tax payer funded salaries so they can stab those who they
represent in the back?
I find it interesting that payday loan offices tend to pop up near military
bases. Norfolk, VA; Jacksonville, NC; Fayetteville, NC…many places I
travel, I see these businesses searching for young desperate individuals.
Those individuals are very often military members or their families. Note, in
our fine town, the payday lending offices are so conveniently accessible to
the Fort. There used to be these rules, called “Usury Laws,” which tried to
keep the “little man” from getting mixed up with lending sharks (often who
attempted to recoup their money by threat of or actual violence). Desperate
people seek desperate means, and today, that means can be payday lenders. In
many states, these lenders have been put out of business because of their
predatory practices. But, wait…it’s a business, right? That makes it OK.
Because it is a business, everything they do will be legal - on the up and
up, right? Capitalism takes care of itself, right? Whatever the market will
bear!
Capitalists put their capital to work, and at risk, in places where markets
seem to exist and where they hope to make a profit. They are not operating a
charity and no one guarantees them a profit. Military commanders are able to
put any business establishment “off limits” to soldiers. That does not
require a new law or putting anyone out of business. If anyone has reported
the use by persons in the payday loan business of “threats of or actual
violence” in order to collect loans I am unaware of it, and so is the AZ Dept
of Financial Institutions. By attempting to put such operations out of
business, just how is it you have helped and protected the “desperate, little
guy” ?
Why is government meddling in this business? If people are desparate enough,
or too ill informed to be wary, why is it government’s job to “save” them?
Can someone give me some statistics about the people who use payday loans so
there is something besides emotionally adrift editors and voters (now there’s
a reason to deny people loans—voters. We all know how wise they are. Some
even keep electing senile McCain). Tell me why there is a public purpose
served by eliminating payday loans. Then tell me how regulating this industry
might be a better approach to elimination. No, this editor merely mouths the
pleas of those who don’t need the money.
Iconoclast asks good questions. What business is it of ours or the govt what
one person agrees to pay to another for goods or services (in this case,
effective interest on a loan)? If one thinks such lawmaking is reasonable
then why not apply it to prices on ALL private transactions - perhaps
including newspaper advertising rates? Regulations, licensing and boards to
decide what pricing is “reasonable” will only achieve a reduction in
competition. And competition is the answer to providing the highest quality
and lowest cost services to the most persons, consistent with making a (hoped
for) profit. So, don’t shut them down or regulate them. Invite lots more of
such lenders to open facilities in the state and let them succeed or fail
based on market demand and ability to operate efficiently and competitively.
I would question how the Arizona voter has the right to vote a business out
of business. Why pick on “pay day loan” companies? They are providing a
service that must be in demand since they don’t seem to have any problems
staying in business. We may not like their rates but then we do not have to
patronize their business. I personally believe that the lottery is a waste of
money but I would not try and prevent someone from buying a lottery ticket
with their own money. I don’t shove money into slot machines but if someone
wants to go to the casinos and gamble with their own money, why should I
care? Saying some company are “predatory” implies that some people are too
stupid to look out for their own welfare. It is not the job of the Arizona
voter to protect these people for their own actions by infringing on the
rights of Arizona businessmen.
Why only a “maximum of 36%” for a loan? Why not 100% or more? Does the
citizen of Arizona’s vote not count?