More On Payday Lending In Kentucky.
Consumers won with defeat of payday lending restrictions
By Kevin Borland
At issue | March 6 Herald-Leader article, "Borrowers caught in 'cycle of debt' look for a way out as lenders applaud demise of payday loan rate cap in assembly"
Kentucky consumers value choice. Whether it's what brand of soft drink to buy, or what model car to drive, Kentuckians want the right to make their own decisions for their own reasons.
At its heart, that is what the battle over payday lending is about, the consumers' right to choose which financial products are best for them and their individual circumstances.
During the recent session of the General Assembly, self-appointed consumer activists once again tried to deny Kentuckians options in the short-term credit market by pushing a bill to force payday lenders out of the state. Fortunately, there were enough bipartisan free-market advocates in the legislature to defeat this infringement on consumer rights; but the activists swore to return with the same bill next year.
Efforts to put annual percentage rate caps on payday loans are driven by a fundamental misunderstanding of the product and pursued by organizations funded by competitors in the short-term loan market place. Kentucky state law specifically prohibits payday lenders from charging interest.
Payday loans are a single-payment, fee-based product. Opponents use misleading and ambiguous language in an attempt to trick legislators and the public into believing that borrowers are subjected to high interest rates, late fees, rollover charges, and all sorts of other charges that are illegal in Kentucky. Payday loans are completely transparent. When a customer takes out the loan, they know exactly how much will be owed at the end of the loan period.
Payday lending opponents in Kentucky consist largely of Citizens of Louisville Organized and United Together (CLOUT), the Kentucky Coalition for Responsible Lending (KCRL) and the AARP. CLOUT and the KCRL are heavily funded by banks and credit unions that compete in the short-term credit market.
We welcome banks and credit unions in the market, since competition generally results in lower cost options and higher quality services for consumers. But it is hypocritical for CLOUT and KCRL to attack payday lending while accepting funding from companies that offer competing products, such as bank overdraft programs that an FDIC study says often cost far more than a payday loan.
The AARP, on the other hand, is a direct competitor to payday lenders. The AARP credit card, issued through Chase Financial, offers cash advances which pile fees on top of interest, making an AARP cash advance not only expensive, but difficult for the borrower to predict the final cost of the loan.
At the end of the day, if CLOUT, KCRL and AARP feel there are some consumers who are being harmed by over reliance on payday lending, they should focus their efforts on finding viable alternatives for those individuals, not depriving all consumers of financial choices. Perhaps such organizations as these would consider offering their own cash advances at no charge for low-income families with specific needs?
A payday advance is not the best option for every consumer in every situation. But we also know it is very often the least expensive, more desirable option for thousands of hard-working families. The decision to make this choice should be that of the consumer, not the legislature or a consumer activist.
Kevin Borland is the Kentucky spokesman of Community Financial Services Association of America, the national association of payday lenders.
Read more: http://www.kentucky.com/2011/04/11/1704022/consumers-won-with-defeat-of-payday.html#ixzz1JMnxapeN
By Kevin Borland
At issue | March 6 Herald-Leader article, "Borrowers caught in 'cycle of debt' look for a way out as lenders applaud demise of payday loan rate cap in assembly"
Kentucky consumers value choice. Whether it's what brand of soft drink to buy, or what model car to drive, Kentuckians want the right to make their own decisions for their own reasons.
At its heart, that is what the battle over payday lending is about, the consumers' right to choose which financial products are best for them and their individual circumstances.
During the recent session of the General Assembly, self-appointed consumer activists once again tried to deny Kentuckians options in the short-term credit market by pushing a bill to force payday lenders out of the state. Fortunately, there were enough bipartisan free-market advocates in the legislature to defeat this infringement on consumer rights; but the activists swore to return with the same bill next year.
Efforts to put annual percentage rate caps on payday loans are driven by a fundamental misunderstanding of the product and pursued by organizations funded by competitors in the short-term loan market place. Kentucky state law specifically prohibits payday lenders from charging interest.
Payday loans are a single-payment, fee-based product. Opponents use misleading and ambiguous language in an attempt to trick legislators and the public into believing that borrowers are subjected to high interest rates, late fees, rollover charges, and all sorts of other charges that are illegal in Kentucky. Payday loans are completely transparent. When a customer takes out the loan, they know exactly how much will be owed at the end of the loan period.
Payday lending opponents in Kentucky consist largely of Citizens of Louisville Organized and United Together (CLOUT), the Kentucky Coalition for Responsible Lending (KCRL) and the AARP. CLOUT and the KCRL are heavily funded by banks and credit unions that compete in the short-term credit market.
We welcome banks and credit unions in the market, since competition generally results in lower cost options and higher quality services for consumers. But it is hypocritical for CLOUT and KCRL to attack payday lending while accepting funding from companies that offer competing products, such as bank overdraft programs that an FDIC study says often cost far more than a payday loan.
The AARP, on the other hand, is a direct competitor to payday lenders. The AARP credit card, issued through Chase Financial, offers cash advances which pile fees on top of interest, making an AARP cash advance not only expensive, but difficult for the borrower to predict the final cost of the loan.
At the end of the day, if CLOUT, KCRL and AARP feel there are some consumers who are being harmed by over reliance on payday lending, they should focus their efforts on finding viable alternatives for those individuals, not depriving all consumers of financial choices. Perhaps such organizations as these would consider offering their own cash advances at no charge for low-income families with specific needs?
A payday advance is not the best option for every consumer in every situation. But we also know it is very often the least expensive, more desirable option for thousands of hard-working families. The decision to make this choice should be that of the consumer, not the legislature or a consumer activist.
Kevin Borland is the Kentucky spokesman of Community Financial Services Association of America, the national association of payday lenders.
Read more: http://www.kentucky.com/2011/04/11/1704022/consumers-won-with-defeat-of-payday.html#ixzz1JMnxapeN
Labels: General information
posted by KYJurisDoctor at 3:35 AM
1 Comments:
Well, High payday lending fees drain resources from communities large and small across the Commonwealth. Sixty-four percent of payday lenders in Kentucky are nationally owned and their profits leave the state. Nine of the 10 largest payday lenders in Kentucky are out of state companies.
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