There is an old saying about the road to you-know-where being paved with good intentions. Time and time again over the years, we have all seen this prophetic statement play out in the real world. From welfare systems that have created people who game the system to make money to people starting charities, only to turn around and skim money off the top of the donation plate. These kinds of things just happen. It may soon turn out that those do-gooders out there who want to help the poor out by coming down hard on payday lenders may find themselves actually doing more harm than good; much more…
Even though President Obama promised a whole lot of hope and change, and that his administration would make radical changes for the better of all, there are still millions of American households who have to live from one paycheck till the next, and that is if they are fortunate enough to even have jobs. Sometimes, these people find themselves in financial situations where they need fast emergency money for bills or other unforeseen expenses. More often than not, these consumers turn to payday lending companies to help avert total financial ruin, often because they don’t have good enough credit to get loans anywhere else.
Here’s an example of how this might play out for someone: Let’s say Debbie needs an extra hundred dollars to pay for a car repair. She goes to a payday lender for a $100 loan. When she gets her next paycheck at work (which she is able to go to because she got her car repaired with her loan money) she pays back the $100, plus a $15 fee to the lender. That situation is a lot better than Debbie losing her job and not bringing in any money for the foreseeable future, isn’t it?
Critics of the payday lending industry would tell you that the annualized interest rate on this loan is way too expensive, and that the lending company was taking advantage of Debbie. However, Debbie would probably tell you that the $15 flat rate fee was a small price to pay to get her car up and running and to keep her job. Heck, she might even tell the person who was “looking out for her best interest” to take a hike.
It’s too bad, then, that Washington D.C. is loaded to the brim with the kinds of bureaucratic minds who think that Debbie’s – and pretty much everyone else’s – business is there for them to meddle in. These kinds of folks never seem to mind their own business, because they have a measure of power, and do everything within that power to lord it over the working class and poor citizens of this country.
A lot of the “do-gooders” and “consumer advocates” we are talking about here work in the Consumer Financial Protection Bureau (CFPB.) This group is on a seemingly never-ending mission to create a financial Nanny-State, and to keep an eye on the financial activity of the people and businesses that make up the fiber of the United States. According to the CFPB about one in five of all payday loans wind up in a default state. What they fail to mention is that is about the same percentage as college students who get federal student loans. The CFPB hopes to solve what they see as the “problem” of payday loans by making in nearly impossible for lending companies to stay in business. They have introduced proposed regulations that would make it extremely difficult – and more than likely unprofitable – for many payday lending companies to stay in business.
The end result – if the CFPB gets its way – is that the financial lifeline of payday loans that millions of lower income Americans depend on for emergency lines of credit would virtually disappear. How is that going to help people when they have to pay doctor bills, get their cars fixed or take care of other emergency expenses when they don’t have cash on hand? Simple answer – it won’t!