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.