By proposing to eliminate short-term loans without offering solutions for cash-strapped borrowers, Jane Whitesides' March 21 column disregards the benefits of short-term credit and the tens of thousands of Missourians who borrow responsibly and use payday loans to avoid less desirable options.
Research from the Federal Reserve Board indicates that such loans are not "predatory." Rather, by supplying credit where otherwise there would be none, they help borrowers by enabling them to avoid less-desirable alternatives, such as fees associated with bounced checks, late bill payments and utility reconnections.
In addition to being more expensive — with annual percentage rates up to 3,500 percent, in some cases — these options often damage consumers' credit histories and therefore their ability to access jobs, homes and other necessities of life.
Research shows that most borrowers understand how much their loans cost and pro-actively choose to borrow instead of their other, real-world options. Most borrowers meet their payback obligations and use the product responsibly, as a short-term solution.
Eliminating Missouri's short-term lending industry would do away with an estimated 10,000 jobs with $378 million in wages, $147 million in tax revenue and an estimated $20 million in annual lease payments for the more than 1,000 storefronts that would empty under the 36 percent annual percentage rate cap advocated by Ms. Whitesides.
Under that cap, lenders would make about $1.38 in revenue for each $100 loan. It costs storefront lenders an estimated $13.89 to offer a $100 loan, according to Ernst & Young.
No loan company could operate with so little money to pay clerks. It simply doesn't work: It takes 15 minutes or more to process a loan, and clerks make $8 or more an hour.
Eliminating short-term lending would hurt Missouri and its communities and devastate families who depend on jobs and important, money-saving credit options supported by the industry.
Finally, the assertion that H.B.656 is "written to benefit the industry" is absurd. The United Payday Lenders of Missouri opposes the bill, which would cost the industry tens of millions of dollars by reducing the loan renewal limit from six to three, requiring a one-day "cooling off period" between loans, and requiring lenders offer free Extended Payment Plans to those borrowers having difficulty re-paying their loans.
Meanwhile, the state's current law is working, evidenced by the few complaints lodged against the industry, the industry's excellent customer satisfaction scores, and the fact that the vast majority of borrowers are using the product responsibly, to avoid more onerous circumstances.
Tom Linafelt is the director of corporate communications for QC Holdings Inc., a payday loan company based in Overland Park, Kan. It is Missouri's largest payday lender, with 102 locations across the state.