Over most of this week, I've been posting on payday loans. Part 1 dealt with the definition and the reason these businesses exist. It looked at some of the details from the business point of view. Part 2 dealt with two states' plans to eliminate these loans. Today, I'll voice my opinion.
I have to say I learned a lot from this research and I generated some new readers. I also got the attention of some of my "old" readers, so hopefully this last post will get some attention too.
I have to start by pointing out (in case you didn't know) that I'm a conservative, who believes in the free market, capitalism, motherhood and apple pie (with ice cream preferably). The idea of restricting business (actually eliminating it) goes against my grain. Companies should be free to run their business in the way they see fit and these companies are not that profitable (9% according to a little math based on this MSN Money article.
These companies obviously fulfill a need and they actually are less expensive than bouncing a check. For example, someone close to me used his Debit Card for $5 of gas (a small spray). Since he only had about $1 in the account, the bank charged him an extra $35. That's expensive gas.
I also believe in self discipline and each person being responsible for his/her-self. If you want to do something stupid, that's fine with me. I'd really like not to hear about it, but you're welcome to shoot yourself in the foot if that's what you want. After all, Barney Fife can't be the only one with a hole in his shoe.
But even with that understanding, I can't help but believe that we'd all be better off if these businesses closed down. Christian Science Monitor says that smacks of paternalism and I agree. But as a father, I think that paternalism is required sometimes. Just like we outlaw crack cocaine, we should outlaw payday loans and their first-cousin title loans.
This will cause job loss. The folks who work in these places aren't all guilty. They just applied for and got a job (which is a good thing) as a clerk. It's not them that's loaning the money out, it's the company. And they will be punished by losing their job. But so too does the crack dealer lose his job when he goes to jail. His family suffers from his loss of income and unfortunately, the payday lending clerk's family will suffer too.
Consumer credit counseling needs to improve. The best defense is a good offense, consumers need to put money aside so they become their own payday lender in an emergency. One of my readers is involved with Junior Achievements, teaching "kids money basics and how short-sighted and addictive this bad credit behavior is." He does lots of other good stuff, so check out Neil's blog when you can (see it here).
So there it is, my opinion. Please feel free to comment on this or either of the two previous posts.