There is no reason to doubt payday lenders when they say they just like getting the less fortunate out of a jam.
In fact, they enjoy it so much that they will do it over and over. It is not always so much fun for their customers, however. Borrow $100 and keep recycling it for a year and it will cost you as much as $652, according to the Louisiana Budget Project.
Payday lenders claim that computing their astronomical annual percentage rates is highly misleading, because their customers typically borrow relatively modest amounts and settle on time. Payday lenders must be some kinda smart, then, because they still manage to pocket $200 million in Louisiana alone. In fact, according to the budget project, the average customer will have taken out another eight loans before he has raised the scratch to pay off the first one.
The customers love their payday loans, however, and want the government to keep its nose out, according to a poll that has just been released. These findings did not come as a great shock, for the poll was commissioned by the payday lenders’ trade association. No, it is not called Usury R Us. The name is Community Financial Services Association of America.
A rival poll, conducted for the AARP in Louisiana, finds a majority in favor of curbs on the profiteering. The AARP, alarmed that payday lenders are zeroing in on Social Security recipients, plans to push legislation in next year’s session.
Payday lenders insist they are misunderstood public benefactors, the only source of emergency cash for working stiffs. They point out that it is often cheaper to borrow from them than to incur a fee for bouncing a check at the bank, while credit card companies charge late fees that send their APR into the stratosphere, too.
There is some truth to those claims, and the proposition that banks and credit companies like to rip their customers off is not, perhaps, a controversial one. But they tend not to have much truck with poor people. Since Louisiana has such an ample supply of them, payday lenders proliferate here. We have 936 of them, or one for every 4,800 people, just about the highest concentration in the country. Every year 57,000 households will take out payday loans.
Payday lenders have been known to deny that they target poor people, although they’d be crazy not to. You won’t find many takers around the country club for a couple of hundred to tide them over until payday. In New Orleans, Baton Rouge or any other city, you can gauge the health of the neighborhood economy by counting the payday lenders and pawnbrokers. This is not just an American phenomenon; it’s the same story in England, for example, although there the bookies’ shops are an additional indication of hard times.
So there is no room for doubt that payday lenders are in the business of exploiting the desperate, and nobody needs to ask what Jesus would do if he came across members of the Community Financial Services Association plying their trade.
The Association polled 1,000 people who had fully repaid loans to five of its member companies — not perhaps a representative sample of the industry’s clientele — and found general satisfaction with the service, although a small minority did support limits on the amount that could be borrowed at one time. Otherwise, respondents figured they should be free to make their own financial decisions without any interference from the government. That view is easier to hold if your financial decisions have not proven ruinous, and a poll conducted among suckers caught in a spiral of debt may have yielded a different result. No doubt payday loans for some are a godsend when credit is otherwise unavailable in a crisis, but let us not pretend that payday lenders are there to do the poor a favor.
It would be unfair to compare them to the loan sharks of yore, but only because only because they are licensed and don’t break legs.
James Gill’s email address is firstname.lastname@example.org.