Sunday, June 14, 2009

Anyday payday, how about today - revisited

Last May (slightly over a year ago), I did a three part series on Payday lending. In the first part (here), I talked about the business and some of the requirements for the business. In the second part (here), I talked about what two states (SC & Ohio) were doing to try to stop the business and in the final part (here), I gave my opinion.

I won't rehash all that was said back then, but I will say that this conservative who prefers less government interference spoke in favor of more government regulation and less payday loans. If you're interested in the details, go back and read those articles. I'll be glad to answer any posts.

Since that time, Ohio passed new legislation aimed at killing the Payday loan industry. The industry used loopholes in the law and kept working. SC failed to pass any legislation, but this year tried again. The legislation passed, however, it was vetoed by Governor Sanford.

According to the Greenville News, "The regulations this bill would place on payday lending would not force the lenders out of business." Of course if you read my initial posts, you'll see that this only partly true, Payday lending can't survive outside its current business model. The bill would have limited the loans to $550 and "consumers would be prohibited from having more than one payday loan outstanding at any given time." There would also be "a one-day waiting period would be established between loans for the first eight loans, with a two-day waiting period on any loans beyond that." This would keep borrowers from paying off one of the loans with a new one. "A statewide database would be created to track who is eligible for payday loans."

All of this seems reasonable. However, the governor disagreed. He said "it is this administration's abiding belief that government's role is not to protect people from their own actions." (Newark Advocate). He also said "he recession leaves consumers needing the ability to get access to cash to avoid eviction, foreclosure, bankruptcy and having their lights turned off."

The bill had an unexpected advocate - Advance America. Now you may be surprised that a payday lending company would support the bill. They said the bill "would have provided consumers who choose to use the cash advance product in South Carolina with comprehensive reforms and protections." (Charleston Regional Business Journal) Advance America realizes that if the bill had succeeded, it would have been free to continue to compete, while smaller companies may have had trouble with the new legislation.

Remember, the best payday loan is your own payday loan. Put $500 in the bank for the emergencies that come up. When an emergency comes up, pull it out, then put it back just like a payday loan. You'll save yourself large fees and maybe even gain a little interest.

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