THE POWER TO DAMAGE SHOULD COME WITH A COMMITMENT TO ASSIST
Our State government passed a payday-lending bill that has fractured the foundation of Washington’s $1.5 billion payday lending industry. Proponents see the bill as a triumph for economic justice for working people. In the wake of that justice, borrowers may be worse off, lenders may shutter offices, and employees may lose jobs. Let’s remember to serve them.
I supported that bill. Based on the latest Department of Financial Industries Payday Report, borrowers paid an average 252 percent interest for a 19-day loan. Social workers have told me their clients got caught in a cycle of these loans and lost pensions and health care.
Borrowers will be restricted to loans from all lenders that are no more than 30 percent of gross monthly income or $700. They will be limited to 8 loans per 12-month period. If requested, borrowers may pay-off their current loan on installments, instead of being forced into three more loans before installment payments. Finally lenders must use real-time data on borrowers to abide by these regulations. That database could cost lenders $35 million over the next ten years. The industry must learn to survive on high loan fees, other financial services such as check cashing, and interest on installment loans.
Based on DFI data, East Wenatchee and Wenatchee’s 12 offices serve 8,200 borrowers. The Financial Service Centers Association reports borrowers are 25-to-44-year-old consumers with personal checking accounts and average household incomes of $40,000. They repay their loans 90 percent of the time. They are our working neighbors.
Approximately 2,700 of them borrow more than eight times a year. What will they do after January 1, 2010? Borrow fewer times with larger amounts and pay more interest by borrowing too much, too soon?
These frequent borrowers took out an astounding two-thirds of the loans in 2007. Payday loans may drop to one-third of present volume. In this dismal economy, more neighbors are worried they will lose their jobs, or their businesses. And local governments may lose more tax revenue.
Will credit unions, banks, and service agencies help these borrowers find better ways to manage their debt? Or will borrowers end up worse by paying check overdrafts and vendor NSF charges? Will they pay late fees and higher interest rates on credit cards? Or lose their credit cards?
Payday lenders are serving people who want to avoid those problems. I talked with one owner who was stunned. He has been in business since 1996 and claims he has never had a customer complaint. The DFI confirms his firm has no complaints. In a few short months his business has been threatened. “Now,” he said, “I’m not sure of my livelihood.”
The payday bill is designed to correct a perceived injustice. But we should have compassion on consumers, employees, and owners. Will our banks, credit unions, social service agencies, and our personal advice to step in to fill this void? Or will we ignore them because justice is served or they are too hard to serve?
I supported that bill. Based on the latest Department of Financial Industries Payday Report, borrowers paid an average 252 percent interest for a 19-day loan. Social workers have told me their clients got caught in a cycle of these loans and lost pensions and health care.
Borrowers will be restricted to loans from all lenders that are no more than 30 percent of gross monthly income or $700. They will be limited to 8 loans per 12-month period. If requested, borrowers may pay-off their current loan on installments, instead of being forced into three more loans before installment payments. Finally lenders must use real-time data on borrowers to abide by these regulations. That database could cost lenders $35 million over the next ten years. The industry must learn to survive on high loan fees, other financial services such as check cashing, and interest on installment loans.
Based on DFI data, East Wenatchee and Wenatchee’s 12 offices serve 8,200 borrowers. The Financial Service Centers Association reports borrowers are 25-to-44-year-old consumers with personal checking accounts and average household incomes of $40,000. They repay their loans 90 percent of the time. They are our working neighbors.
Approximately 2,700 of them borrow more than eight times a year. What will they do after January 1, 2010? Borrow fewer times with larger amounts and pay more interest by borrowing too much, too soon?
These frequent borrowers took out an astounding two-thirds of the loans in 2007. Payday loans may drop to one-third of present volume. In this dismal economy, more neighbors are worried they will lose their jobs, or their businesses. And local governments may lose more tax revenue.
Will credit unions, banks, and service agencies help these borrowers find better ways to manage their debt? Or will borrowers end up worse by paying check overdrafts and vendor NSF charges? Will they pay late fees and higher interest rates on credit cards? Or lose their credit cards?
Payday lenders are serving people who want to avoid those problems. I talked with one owner who was stunned. He has been in business since 1996 and claims he has never had a customer complaint. The DFI confirms his firm has no complaints. In a few short months his business has been threatened. “Now,” he said, “I’m not sure of my livelihood.”
The payday bill is designed to correct a perceived injustice. But we should have compassion on consumers, employees, and owners. Will our banks, credit unions, social service agencies, and our personal advice to step in to fill this void? Or will we ignore them because justice is served or they are too hard to serve?
Posted by JSR at 5/21/2009 11:18 PM 
Categories: Wealth,Compassion
Tags: Payday lending Credit Counseling Small Loans Home Finance Check Cashing Washington Legislature Economic Justice
Categories: Wealth,Compassion
Tags: Payday lending Credit Counseling Small Loans Home Finance Check Cashing Washington Legislature Economic Justice
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