Friday, May 25, 2007

Pretend for a moment that — like most Arizona residents — you make enough to make ends meet but haven’t accumulated much in the way of savings or assets.

Your car breaks down. You need $300 to fix it so you can get to work. You’re not comfortable borrowing from friends or family. You don’t want to max out your credit card, bounce a check or pawn personal items. What do you do?

Providers of payday advance loans each year help thousands of Arizona families overcome unexpected financial circumstances.

When an air conditioner breaks or a car battery dies, Quik Cash and other responsible bad credit payday loan lenders provide convenient access to small amounts of money to cover those costs. Banks don’t — they instead make billions on bounced check and non-sufficient-fund “protection” fees.

Critics, including the Arizona Daily Star, have labeled payday lending as “predatory” without ever having defined what “predatory” means. Recent studies debunk that myth and underscore the fact that before restricting or eliminating such short-term credit options, public officials should better understand the consumer demand for such products and the unintended consequences any such restrictions might create.

Indeed, a January 2007 study by the Federal Reserve Bank of New York found not only that cash advance loans were NOT predatory, but also that by increasing the supply of credit to an under-served market they enhance the welfare of the households they serve.

Another study, by the Indiana Policy Review Foundation, found that further regulation of payday lending has the adverse and unintended consequence of reducing credit options for those who may have few alternatives, and that policymakers should encourage competition in the small-loan market, as competition controls prices.

The payday loan online lending industry’s largest trade association, the Community Financial Services Association, recently launched a customer pledge that includes a $12 million public education and financial literacy campaign and an extended payment plan granting any customer, at any time, for any reason, more time to pay off their loan at no additional cost.

Banning the industry would deny Arizona consumers the right to make their own choices, limit their credit options, and force many to risky and more costly options such as unregulated off-shore Internet lenders and bouncing checks.

Cash advances are a sensible choice for many facing personal emergencies and more-onerous fees such as those associated with bounced checks and late bill payments. Just as a taxicab 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 a week or two before payday.

Let’s give reasonable, hard-working Arizona consumers access to a variety of regulated credit options and trust them to make financial decisions based on what’s best for them and their families.

SOURCE: Arizona Daily Star

This entry was posted on Friday, May 25th, 2007 at 5:56 am and is filed under Arizona.