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February 6, 2008
Farifax, VA:
A team of researchers from George Mason University and Colby College have found that allowing individuals access to payday loans improves the borrowers' ability to survive financially. Because payday loans can help the participants to manage their personal finances better, the availability of payday loans -- despite their high cost -- improves consumer welfare in the study by allowing borrowers to deal with unexpected expenses. However, borrowers whose demand for payday loans exceeds a certain threshold level are at a greater risk than those who do not have access to payday loans. |
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Federal Reserve Study Reveals Cost of Denying Options to Consumers
By Niger Innis
January 2, 2008
It's one of the cornerstones of our free-market system: Choice benefits consumers. A recent staff report from the Federal Reserve Bank of New York confirms it in regards to "payday" loans, those small short-term cash advances that politicians love to bash.
There's no doubt that a huge market exists for payday loans. According to the industry, there are more than 22,000 retail payday locations across the country offering about $40 billion in short-term credit to consumers. The main beneficiaries of payday loans are working households in minority communities, which have been traditionally underserved by banks and other financial institutions. |
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New National Payday Loan Consumer Information Program
Payday lenders in California welcome the new consumer information program for payday lending customers introduced today by the Community Financial Services Association of America (CFSA).
The new CFSA program includes large postings of all transaction costs in stores; a multi-media public information campaign about the responsible use of payday loans; and a new website designed specifically to help consumers determine how the product works in their state (www.knowyourfee.org). |
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An editorial from Cecil H. Steppe, Retired President & CEO, Urban League of San Diego County
... On October 1st, a federal law will go into effect that will take away several of these options for the military. That law (known as the Talent Amendment) will effectively eliminate payday lending, tax refund anticipation loans and title loans as short term credit options for military members. It will also affect military spouses (even when applying for a loan on their own, separate, nonmilitary income) and anyone who has received 50% of their support from a military member prior to applying for a loan. I’m not here to endorse these loans or to say that they are the best financial decisions all the time, for  everyone but I’m also not here to say that they are the worst. What I will say is that eliminating these options does little to tackle the root demand for this type of credit - low pay and lack of financial options and education.
Read the whole editorial (67 KB PDF) |
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