There are many disputes in regard to. Some people are completely against them, claiming them to be chancy of which are in complete disagreement with those that say that payday loans are realistic and claim it to be represented in the use of bridge loans in the market.
Take for example, together the Center for Responsible Lending and Self-Help Credit Union have successfully taken outshops one by one throughout Georgia and North Carolina. Their reason for closing out payday loans is that they are saving the residentsâ€™ $154 million annually in Georgia alone. The problem is that there was no fact in the claim.
The end of payday loans in Georgia resulted in an increase in overdraft and late fees charged by banks and credit companies paid by consumers. Economist Donald Morgan of the Federal Reserve Bank in New York observed that when payday lenders were asked to close their shops in Georgia, it was the credit unions that were profited the most. In a recent interview with Forbes Magazine, Morgan stated that, “interest rates on overdrafts charged by credit unions and banks can exceed 2,000%, dwarfing the high interest rates on payday loans.”
He went on to say, â€œCredit unions have been especially hurt by payday lenders cutting into their overdraft fees – bounced – check revenue at the typical credit union can amount to 60% of net operating income. Itâ€™s just 18% for banks.â€
Morgan, who questioned the research from the Center for Responsible Lending, stated that banning payday loans often leads to more bounced checks, bankruptcy and collection problems. Morgan reports that bounced checks increased by 13% when payday loans were banned in Georgia in 2004.
In the Norfolk, Virginia metro area, a separate report uncovers that most payday borrowers are educated, middle class consumers who are using bridge loans responsibly.
The Center for Responsible lending and the Self-Help Credit Union may paint a bleak picture but the reality of payday loans situation is very different. Those who work to ban payday loans do it under the guise of consumer advocacy. In states where payday loans have disappeared, Self-Help Credit Unions are all about profit.
Before finding fault with those engaged in aggressive lending, the Self-Help Credit Union should look at themselves. Self-Help typically pays between zero and four percent interest on the loans it obtains, many of which come from government-supported entities. However, Self-Help has a much higher interest rate they charge consumers. The Self Help Venture Fund reported interest rates of more than 10% on its tax forms in 1998.
In addition, although they are obviously arduous,charges are not as huge a burden as overdraft and bounced check fees. The free market means that we as consumers are able to choose what is best for us. Payday loans are just another financial tool, just like a checkbook or credit card. Sadly, consumers pay when they lose their rights.
The objective of The Center for Responsible Lending is to use consumer’s fears and anxiety to close down payday lenders, thereby restricting the consumer’s options. One would hope that the Center would recognize and admit that customers are intelligent enough to make their own decisions and manage their own money.