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LETTER: Cap on short-term loans is too restrictive

Monday, March 28, 2011 | 10:56 a.m. CDT

I am concerned by a recent guest commentary ("Predatory payday loan industry needs reform") supporting the institution of a 36 percent APR cap for short-term loans in Missouri, and encouraging the elimination of two-week loans.

Lenders – storefront companies like mine, but also banks and credit unions – cannot operate a sustainable business under such a restrictive cap. Ms. Whitesides claims that some credit unions are "very successfully" making small-dollar, short-term loans. Yet, numerous government studies have found that traditional financial institutions resist short-term lending because is it not a profitable or viable business option. When they do provide such services, the loans often involve opaque and expensive fee structures in an attempt to turn a profit. These "alternative" products may provide another option, but they cannot be considered an effective replacement for widely accessible, highly regulated payday advances.

In addition, we care deeply about ensuring our customers' ability to repay their advances; in fact, it is essential to our business. All of our customers possess a steady source of income and a checking account. Furthermore, our customer satisfaction and repayment rates are both above 90 percent, a reflection that they value our service and understand the associated costs.

Consumers should make informed decisions and carefully consider their borrowing options. In doing so, some consumers may decide that payday advances are not suited for their needs; however, they remain an important and flexible option for others, allowing them to responsibly negotiate short-term financial hardship.

Jamie Fulmer is the vice president of public affairs for Advance America, Cash Advance Centers.


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Comments

Belinda Olive March 30, 2011 | 2:52 p.m.

When saying that payday loans carry high APR, you really have to look at the big picture. Sure, a 300% APR for a loan might seem like a lot, but just compare that to other emergency financial solutions, such as bounced check or NSF fee (up to 1,250%), a late or reconnection utility fee (up to 1,300%) or a one day late fee on your credit card (as much as 10,00%)!
Especially in times of economic downturn, such as now, I think we should be giving consumers more credit options, not less. Many subprime consumers are finding that they have fewer and fewer choices when in need of immediate credit. While payday loans may not be a long-term solution to their problems, they can help many hardworking people make it through difficult short-term periods or cover emergency expenses that they never saw coming.

(Report Comment)
Jack Hamm March 30, 2011 | 3:18 p.m.

Belinda,

You wouldn't happen to be Belinda Olive the market manager at Cash America (one of the country's largest payday loan companies) would you?

Try not to be so transparent in the future and take your propaganda somewhere else.

(Report Comment)

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