S.F. Paper’s Critique Of Payday Loans Omits Facts
By Desmond CarlislePayday Loan Writer
In response to a scathing San Francisco Bay Guardian editorial regarding payday loan firms, a reader — who happens to be a Senior V.P. of the Community Financial Services Association of America — takes the publication to task over a couple of missed facts.
First of all, contrary to popular belief, she asserts that payday advance customers are not poor. Research shows they are often middle-income, educated, working people — more than half of whom make between $25,000 and $50,000 annually. About 58 percent of applicants have attended some college, and nearly 100 percent have a bank relationship, as a personal checking or savings account, along with a steady income, is required to get a payday advance.
The Guardian references the millions in revenues being "pocketed" by payday lenders, which shows a disregard for the facts. Short-term loans are actually expensive to originate, and the revenue of payday companies is simply the total amount of fees collected. All operating expenses — employee payroll and benefits, rent, utilities, loan losses, et cetera — must be subtracted from that sum.
Because banks and payday advance lenders offer different services, it is inaccurate to assume the physical presence or absence of one affects the other, as the Guardian asserts. A payday loan is a small cash advance for people needing help between paychecks. The demand for this product was created because banks stopped making short-term loans, not because they moved out of low-income neighborhoods.
Millions of consumers choose payday loans as convenient alternatives to bounced checks and overdraft fees, or late penalties on credit cards. They find payday loans easier than asking family or hocking their possessions at pawn shops. Customer satisfaction figures exceed 80 percent.
The Community Financial Services Association of America has worked in 38 states, including California, with lawmakers who wish to support consumer protection. The association believes Californians are best served when given a variety of options — as well as the full disclosure of facts — and then trusted to make financial decisions based on what's best for themselves.
February 20th, 2006 at 1:54 pm
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