Should payday loans be banned?

The Associated Press

Easy to borrow. Easy to pay off?

Featured Topic | Posted 1 week 7 hours ago

Payday loans are supposed to help borrowers out of short-term cash crunches. Often, though, they end up miring workers in insurmountable long-term debt. Hillary Clinton and Barack Obama have both criticized payday loan companies and suggested they would crack down on the industry if elected president. And now the South Carolina General Assembly is considering legislation to greatly restrict lenders. But defenders of the industry say government shouldn't intrude onprivate financial choices.

Should payday loans be banned? Or should government butt out?

Ben likes: Better than a bounced check

Tim Miller/Christian Science Monitor

Fed up with politicians incapable of balancing budgets? Well, now state legislatures across the country want to take a crack at balancing your checkbook – whether you like it or not.

Paternalism – the idea that government must take care of adults because they aren't able to do so themselves – is the ideology behind the wave of politicians determined to limit how much and how often Americans can borrow money. By putting stringent restrictions on borrowing, these politicians would effectively ban the practice of short-term "payday" lending, no matter how many people use it responsibly in times of crisis.

For those who enjoy access to high lines of credit, these short-term loans – which essentially let customers borrow cash from their next paycheck – may be a bad deal. But many of the less prosperous don't have such attractive alternatives to the kind of loans that politicians like to demonize.

Joel likes: Putting a target on desperate people

Mary Kane/The Washington Independent

Sometimes there's no way to put a gloss on what things really are. And payday loans aren't a needed financial service; they're a ridiculously high-rate product aimed at desperate people.

The industry denies this, and with an attack-dog public relations firm goes after its critics. The only people who oppose payday lenders, they argue, are consumer groups and elitists, who don't understand how hard it is for ordinary folks to find a small loan when their car breaks down or they can't pay a bill.

Fair enough. But it's also been proven, time and time again, that these ordinary folks don't go to the payday lenders for a one-time problem, and then move on. Nearly all payday users are repeat customers, often paying 400 percent interest or more on loans that they roll over again and again, piling up more in fees and interest charges each time.

If you ignore the industry rhetoric and talk to people who use the lenders, they always tell you they never intended to keep coming back for more loans. They ran short one time, and when they were due to pay back the loan two weeks later, they owed so much in fees it made sense to take out another loan. And another. And another. And then they were stuck.

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SOLUTION IS REALLY A NEED TO RAISE INCOME

Submitted on May 11th, 2008 by Anonymous

If just above or minimum wage workers got the kind of raises CEO's have managed to get in recent times these blue-collar workers would be making $20 an hour.

Maybe we wouldn't have such discontent in this bountiful country. It all begins at the base which is unequal distribution of income and trying to FIX the problem somewhere in the middle won't work.

Adults should be given all

Submitted on May 8th, 2008 by Anonymous

Adults should be given all of the information they need and then allowed to make the decision about what financial products work best for their families and their individual situations. Prohibiting payday lending only forces consumers to use the other, more costly short-term credit products available, such as overdraft protection, late fees on credit cards and other bill payments and off-shore Internet lending.

Every day IS a Payday Loan

Submitted on May 7th, 2008 by John 2000

Every day IS a Payday Loan for most Americans.

Interesting article and some interesting comments associated to it:

http://www.alternet.org/workplace/81004/

Torn on the issue

Submitted on May 7th, 2008 by Anonymous

For me this is not a simple meddlesome big government issue. It is more about protecting those of us who are responsible with our money from having to bail out those who are not. I wish that the subprime mortgages had been deemed illegal before all the people lost their homes, or soon will, and are now expecting the government (the taxpayers) to bail them out. Obviously in a perfect world we would all get an equal share of the money and no one would be rich and no one would be poor....wait, that's communism!! In real life there are poor and rich and a whole lot of us in the middle that do occassionally struggle paycheck to paycheck. If you start taking out payday loans, you run the risk of never getting caught up. I strongly suggest you find other methods of dealing with it. Don't use credit cards, either.

payday loan

Submitted on May 7th, 2008 by Anonymous

Payday loans are horrible, and I speak from experience, unfortunately. You take one out with all intents of paying it back within 2 weeks; then, say, you get an unexpected medical emergency, and have to extend the loan another 2 weeks. And so on, until you're paying horrible amounts of interest. if anyone wants to read some real horror stories about PDLs, please visit the debtconsolidationcare.com website and click on "getting out of payday loans."

It would be far far far far

Submitted on May 6th, 2008 by John 2000

It would be far far far far -> infinitely better and wiser for the government in a far far far far non-partisan way to start concerning itself with the institutionalized borrowing before payday and related issues that have all of us in a bind than it is for the government to try micro-managing the little folk's problems.