The Payday Loan Debate
Payday loans, and those who lend them, have traditionally received a bad – and often undeserved – rap from much of the mass media. The majority of this bad publicity seems to come from biased or generally invalid sources and are meant to push consumers away from short-term loan options and towards high-rate credit card lenders.
But new reports from some of the very sources that have blasted payday lending in the past, show a more complete understanding of the role and benefits of these quick and secure loan options.
In January, the Federal Reserve Bank of New York released a report stating that not only were payday loans not considered predatory lending, but in fact they served to enhance the welfare of thousands of underbanked households (read the article here: “Defining and Detecting Predatory Lending,” by Federal Reserve Bank of New York Research Officer Donald P. Morgan).
A similar study has shown that the actions of several state legislatures, designed to chase off these short-term lenders, has actually led to fewer credit options for their citizens, not to mentioned decreased the amount of competition in the lending arena, thereby increasing the fees passed on to consumers (read: “Payday Lending and Public Policy: What Elected Officials Should Know,” by Tom Lehman of the Indiana Policy Review Foundation).
The lesson is simple: it’s important to understand all sides of a debate before making a decision. It’s also vital to know whether or not the sources of the information you find are credible – Federal Reserve Banks, reputable news gathering agencies or government institutions tend to offer the most unbiased information. The more you know – the more equipped you will be to find an honest and trustworthy loan option.
