Fair enough. Unfortunately, small loans would be more expensive to make if they had to be underwritten with the same standards as a mortgage loan or a car loan (we don’t have to talk about how those underwriting standards were compromised in recent years). I agree that some lenders charge outrageous fees, but what is a reasonable rate of interest for these types of loans? 36% APR would eliminate the product altogether. The Gutierrez bill sets a cap of 15% of the loan amount, which is still about 390%APR for a two week loan. APR is clearly not a good representation of interest for short term loans. The banks and credit unions really don’t like when you quote their overdraft fees in APR terms, either.

The solution is responsible legislation, which has been lacking. Politicians really don’t understand the product because they really don’t have any experience with it. ‘Consumer advocates’ such as the CRL and many, many other entities have their own agenda. It seems like the climate is for no regulation or overregulation. I think there needs to be some common sense applied here.

I always thought that these loans should have a limited period in which loans can be charged the contract rate of interest (such as $15 per $100 borrowed per pay period, but only for a certain number of pay periods until the loan is placed into a fully amortized repayment plan). The Gutierrez bill has some language to this effect, but it’s interesting to see that the opponents to this bill are those who think there should be no regulations alongside those who think the product should be banned.

Consumers are the ones who suffer because their interests are not being protected. I am not saying I am for the Gutierrez bill, but at least someone is making the attempt to compromise–small, short term credit is necessary, and could use some standard regulatory structure. This is what the CFSA advocates and the lenders that belong to it are the more reputable ones.

You obviously think I have something against payday lenders. This is not true. I believe that the short-term loan absolutely serves a purpose in the lending market.

My only quarrel with payday lenders is their lack of underwriting criteria and the obscenely usurious interest rates that they charge.

I have checked their data and their methods and I would suggest that you do this as well. And as far as questionable goals, I believe that an interest rate ceiling of 36% is anything but questionable.

CRL, by the way, was not the only source for this article. Perhaps you’d also like to question the ethics of CBS News, as well.

A steady income and checking account are not “underwriting criteria” but only a guarantee that the payday lender will have a source from which to collect their fees. Real criteria would include a debt to income analysis and a lack of this type of underwriting is what leads many payday borrowers to become trapped in the loan cycle.

The fact that 90 percent of payday advances are repaid when due does not reflect the fact that many of these payments are made from the funds secured by an additional payday loan and therefore these statistics are very misleading.

Besides, payday lenders who belong to CFSA provide their custoemrs with an interest-free payment plan at least once a year. If the business was so dependent on repeat business this interest free payment plan would free consumers from the need for payday loans.

In reality the cost of overdraft and bounced check fees (which are two to four times as much as payday loan fees) drive consumers to utilize payday loans. Stop allowing financial institutions to charge such high overdraft fees and see payday lending decrease as well.

“Center for Responsible Lending cannot seem to look at data and apply a common sense analysis. Let’s be clear about the demand for payday advances. Consumers find themselves with an urgent need to pay a bill before payday. They survey their choices—payday advances, bank or credit union loans, overdraft protection, title loans, borrowing from family members, pawnshops or credit card advances. They also carefully weigh how much each will cost them in simple dollars and cents. Many choose a payday loan.

“Now we agree with Center for Responsible Lending that sometimes one payday advance is not enough. The financial hit the consumer took—a car repair, a hospital bill, a utility bill payment—might not be resolved. But after a payday advance, consumers still have all the other options. The fact they many choose another payday advance is evidence that we offer a strong alternative to the other services.

“We offer consumers a solution to short-term finanical problems. Center for Responsible Lending offers them sympathy and moral support.”

Find a more credible source. There are bad apples in the payday loan business, but it is ridiculous to assume all lenders are the same.

I don’t and you shouldn’t either. This outfit has a long history of manipulating information and grandstanding to acheive their questionable goals.

Have you checked their data and methods of gathering it? If not, you shouldn’t repeat this (mis)information.