Payday Advances: From All Sides
By Paul RizzoPayday Loan Writer
The Post and Courier takes a look at all sides of the South Carolina payday loan debate below …
As state lawmakers get to grips with cash advance companies, a report released last week by the Federal Reserve Bank of New York argues that payday cash advances are not predatory lending.
Rather, these loans can “enhance the welfare of consumers by providing them a critical choice for managing short-term financial challenges,” the report says.
This announcement was generally made in the form of a press release from Spartanburg-based Advance America, Cash Advance Centers, the nation’s largest easy payday loan lender.
In the news release, Ken Compton, Advance America’s chief executive, called the study “an important academic perspective on the debate surrounding payday lending.”
The study, written by Donald P. Morgan, a research officer for the Fed in New York, compares the differences in household debt across states that allow payday lending and those that do not.
The report uses data provided by the Consumer Federation of America and other sources. It concludes that payday loans no faxing can enhance the welfare of households by increasing credit. In addition, the report asserts that consumers appear sophisticated enough to seek lower prices for products, and finds that some of those who use payday advances for short-term budgeting do so to avoid missing other payments.
Compton said critics who attack the payday loan industry question the ability of those who use online payday advance loans to look after cash in a responsible way. The study helps shatter some of those misleading stereotypes.
On the other hand …
The Federal Deposit Insurance Corp. last week issued a Supervisory Policy on Predatory Lending that describes certain characteristics of the practice and “reaffirms that such activities are inconsistent with safe and sound lending, and undermine individual, family and community economic well-being.”
The availability of credit to consumers with limited or problem borrowing histories has increased over the past decade, the FDIC said. At the same time, competition in the credit markets to lend to both prime and subprime borrowers has resulted in offering a broad variety of credit products.
As credit products become more complex and available, risks associated with predatory or abusive practices increase.
Meanwhile …
A Virginia state Senate panel last week voted to tighten regulation of payday lenders, and bills that would virtually end bad credit cash loan lending there remain alive in the House.
The bill passed by the Virginia Senate Commerce and Labor Committee would prohibit payday lenders from approving more than three loans annually to individual borrowers.
In South Carolina earlier this month, Rep. Alan D. Clemmons, R-Horry County, filed a bill to cap fees and place restrictions on the number of payday loans a borrower can carry at one time.
