Should payday loans be banned?

The Associated Press

Easy to borrow. Easy to pay off?

Featured Topic | Posted 1 year 8 weeks 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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Thoughts

it comes and goes

Submitted on April 5th, 2009 by John 2000

you have to go back pretty far on this thread before you find any actual responses.

What?

Submitted on April 5th, 2009 by HammockLaying

Is this spam usual?

This is not reasonable for

Submitted on April 3rd, 2009 by Kale F

This is not reasonable for me! Payday Loan companies are helping people in time of urgent needs and the service they are giving is really great! Their aim is to unveil a hybrid car that will get up to 100 miles to the gallon. The new "Car czar," Edward Montgomery will undoubtedly be a fan, as he is set to take an oversight role of the automotive industry since they got so much of our money. You shouldn't think about a personal loan for one yet –they don't plan to have it ready to ship until 2012. However, once it unveils, and if it has a reasonable price, it may be good to look into Bright automotive.

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