A Payday Advance Can Be Cheapest Alternative
By J.J. CameronPayday Loan Writer
Darrin Anderson is president of the Community Financial Services Association of America. He recently wrote in to USA Today in response to an article in the newspaper regarding cash advance regulations.
Here's a summation of what he had to say:
Like most successful businesses in America, the payday advance industry exists because we offer our customers a product that is more desirable than the alternatives.
Although 100% of cash loan customers have a checking account at a bank or credit union, they turn to payday lenders for their short-term credit needs. Traditional lenders simply do not meet the demand for small, short-term loans.
USA Today's call for interest rate caps and other restrictions would result in the elimination of an affordable credit choice. Policymakers in 37 states and the District of Columbia have debated the issue and passed strong consumer protections. They recognize that eliminating a choice does not eliminate the need for short-term credit.
Why do individuals choose online cash loans? Because they cost less than bouncing a check or paying overdraft fees, late bill penalties or credit card late fees,;and it's more desirable than asking family for money or pledging personal possessions.
Payday advance customers are the heart of America's middle class - educated, hard-working adults who often need access to short-term credit. They understand the fees and are capable of comparing the cost of a payday advance with alternatives.
For each $100 advanced, customers pay a typical fee of $15. On average, bounced check fees are $27.04, credit card late fees are $32.61 and merchant-returned check fees are $26.64. Is a payday advance loan the right choice in every situation? Not necessarily.
Just as a taxi cab is not the right choice for a cross-country trip, but a good choice for a ride across town, a payday advance can be the best choice for someone short of cash before payday.
Instead of limiting options, a better solution is to keep freedom of choice for consumers. As USA Today recently reported, credit unions and banks are already attempting to develop their own short-term credit products that are similar to no faxing payday loans. We welcome their entry and believe competition is good for consumers.
Americans are best served when they have access to a variety of regulated options and are trusted to make financial decisions based on what's best for them and their families in different situations.
