Conservative Viewpoints

"Government is not the solution…it is the problem" -Ronald Reagan

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Title, Payday Lenders: The new predators?

Posted by Stephen on February 7, 2007

Delegate Terry Kilgore is wrong; dead wrong.

In a recent op-editorial in the January 12 edition of the Roanoke Times, Del. Kilgore lamented over the need to allow title lenders to achieve the same status as the predatory lending industry known as payday lending.

While we work to improve opportunity and success for Virginians, we must not fall into the trap that all businesses are good businesses for our communities. Delegate Steve Landes stated in a speech to constituents that we must continue to expand business opportunities in Virginia, but these businesses should be principally and morally sound businesses.

What is sometimes lost in the free market conversations surrounding payday and title lenders is the damage done to the business community by this industry.

These types of predator lenders are detrimental to the credit worthiness and the fiscal position of the consumer base, eliminating their ability to invest in the free market, while also burdening the business community with bounced checks by consumers and even an inability to recover funds when the consumer is decimated by the collection practices of these predator lenders.

Del. Kilgore, the major contention is not the annual percentage rate, as stated in your op-ed piece, but rather the debt trap that consumes and traps an individual into taking loan after loan. The reality is that people taking these loans are living check to check. The demand placed on them to pay back a loan, plus fees, on their next payday, means they are left with no alternative but to take another loan.

It is important to note that this is an industry that measures success by the defaulted loan. This industry stresses that if a consumer defaults then the industry has successfully saturated the consumer’s financial position to the breaking point.

To suggest, under the guise of the free market, that these individuals have a choice is to suggest that they enjoy paying $45.00 in fees on a three hundred dollar loan every single time they are paid. That seems like an awfully expensive hobby to me.

Remember, this is not new money they are obtaining on each loan. It is simply additional fees incurred because they cannot pay off the original loan.

Unfortunately, your choices of examples to support your position are questionable at best. The examples of gift card fees, which have nothing to do with loan practices, or the use of an American Express card are not relevant to this discussion.

First of all, in all the time I was a manager in the payday lending industry I never dealt with a customer that possessed an American Express card. Most customers were lucky to have a check card from their bank. Those that had credit cards, in most cases, had exhausted their maximums on those cards.

Secondly, credit cards do not typically require full payment on your payday, but rather create reasonable monthly payments for the consumer; a practice glaringly absent from the policies of predator lenders like payday lenders and title lenders.

Finally, with all due respect, please do not suggest that Milton Friedman, perhaps the greatest economist in the history of the free market, would advocate an industry that oppresses the free market by entangling the consumer in a cycle that prohibits free choice and instead condemns the consumer into a perpetuating fiscal crisis from which they cannot escape freely.

This industry clearly exploits the needs, problems, and fiscal crisis that the working poor, senior citizens on fixed income and other vulnerable citizens face while struggling from check to check.

Stephen Winslow is the executive editor of Conservative Viewpoints.


One Response to “Title, Payday Lenders: The new predators?”

  1. finnegan said

    Stephen, I disagree with you on many, many things. But on this issue I believe we are in total agreement.

    I have to wonder why everyone was feeling sorry for payday lenders when this bill was still on the table, saying that “Oh, if we cap this at 72 percent, they’ll go out of business.” First of all, 72 percent seems very high to me. Second, who cares? These places are not “offering a service,” they’re making money off of the poor.

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