Payday Loans = Mayday

I received an email this week from advertising representative from a payday advance loan company asking me if they could advertise on my company’s site.  My company, Dollars & Sense Education provides personal finance education in the workplace.  Payday loans are predatory loans that prey on unsophisticated people with little to no financial education.  This would be equivalent to Marlboro asking the American Cancer Society to advertise on their website.  I sent them a scathing email. 

Just like smoking, I know the consumer bears alot of the blame.  But these companies make a living from putting people into financial ruin.  At least packs of cigarettes coming with a warning label.

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3 Responses to “Payday Loans = Mayday”

  1. Aggie Clark Says:

    I would urge Dollars and Sense Education to look further into payday loans. From your comments it seems that you’ve been reading the sensationalized rhetoric that’s been so common lately, rather than looking into the value of a product that millions of Americans choose when they need to borrow money between now and their next payday. Look at the competing products: bank overdraft fees, bounced check fees and late fees are just other types of short term credit, where the bank or creditor charges a fee to the customer to cover payments for just a few days. Compared to these products and their associated fees, a payday loan can be a less costly alternative. Look past the APR to find out that although competing products aren’t required to disclose an APR, if they were required to do so, it would be higher. Consumers are making educated financial choices. I ask that you look into short term credit alternatives, what they cost, when to use them, how to evaluate them, and how to determine whether short or long term credit is the right financial tool, depending on the situation. Also look at the http://www.cfsa.net website to find information about the customer notice that will be on all member advertising material as of 5/31/07. The Payday Loan industry wants consumers to be making informed decision, and we’re committed to spending advertising dollars and space to do so. There is much more to this story than what the critics who are advocating taking this choice away from consumers would like you to believe.

  2. Larry Says:

    Our blogger is right on.

    The paycheck advance business is one manifestation of an extremely exploitive industry that preys on people who are not financially adept. Such people are typically low-income to begin with, but in any case, once they start getting paycheck advances, they’re probably on the road to poverty and possibly bankruptcy (if bankruptcy protection hadn’t been gutted). The industry includes not only the “Payday Advance” people, but also credit card companies, banks, loan companies, and all the others that routinely charge 18, 24, 36 percent interest plus exorbitant fees. I don’t know what the effective APR is on a paycheck advance, but I bet it’s pretty bad.

    We have legitimized an industry that used to be run by the Mafia. Ever heard of loan sharks? Ever heard of usury laws?

    In her followup comment, Aggie is right that they are not the only “bad guys,” but that doesn’t mean they are blameless.

    A “bounced check fee” is a “competing product”?

    If we’re concerned about “sensationalized rhetoric,” take a look at the paycheck stores’ advertising!

  3. Paul Says:

    I think it’s good people are covering the good and bad about various loan products. Get all the information out there for the consumer to decide. I have never been into a payday loan center myself so can not really give my impression of them. I hear that there is legislation pending on them in local and federal governments though.


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