If you’ve ever been in a situation (as most of us have) of being caught short in a financial crisis, then you’ll know just what a bonus a shortterm payday loan can be. I know that many of us have found ourselves in mid-month with no cash and a family to feed; others have been faced with a personal crisis such as a death in the family and sudden funeral costs to face, a sudden car repair that you didn’t plan for, a shut off notice on a utility that is due before your next paycheck comes. Whatever the cash crisis or problem, a payday loan has been the answer to a prayer for many.
Now, a group of legislators in Madison have decided that these type of loans are traps and dangerous for people, and they are really looking to close them up, not just crackdown on them. They want to ban auto title loans, limit payday loans to $600 and prevent borrowers from taking out more than one loan at a time. They even proposed an interest rate cap, that would have eliminated the payday loan business and an option for consumers. Fortunately that amendment failed on the Wisconsin State Assembly Floor on Feb. 16. We sincerely appreciate Representatives Fields and Young’s votes in defeating the Cap Legislation.
Where these intentions may seem admirable at first glance, what about the people and not just “poor” people who need a financial option that just takes them to their next check. Why do we need legislators to dictate consumer decisions by eliminating their choices? This is also about consumers having options and choices to make our own decisions. The payday loan procedures are quite clear when the loan is being taken.
What exactly is a Payday Loan?
Some people may not be quite sure what a payday loan is, or what it involves. In short, a payday loan is an unsecured, short-term cash advance against your next paycheck. Your job and your next paycheck are your collateral against the loan.
Typically, the amount you may lend varies from $300 to $1500 (the amount granted by the lender will depend on your income and various other factors). The payback period for these cash advance loans is short – usually the loan is paid back on your next pay day, although some lenders are more flexible and offer slightly longer payback periods. Flat fees are charged for the initial loan amount, and that amount varies by each payday loan institution. Now, like any loan, when it is not paid back by the next paycheck, then more interest fees come into the picture, and this can be where the debt becomes less manageable, same as credit card debt when you only pay the minimum payment each month or you are late, same as when you write a check that may cause overdraft fees, ranging from $20.00 to $38.00 per overdraft. Which brings up another issue, where is the proposed legislation for the banking and credit card industry that also become financial traps for people?
It does appear that the payday loan industry is being singled out for some reason, but for those who have a need for this business or even those who haven’t had the need but who would like to have the option, now is the time to speak up about it.
Are people going to be forced to go to street lenders for their emergencies? Because a regulation crackdown that eliminates these businesses will not eliminate the financial need that still exists. Are legislators saying that people who may need some financial assistance are not intelligent enough to make their own financial decisions? These businesses do not prey on people they are simply available, in fact they don’t even need to advertise their product. Instead of eliminating options, legislators should find a way to open up the door for more options. If the banks are threatened by this, then begin offering something better. Businesses don’t last unless there is a demand. Look at the need for the demand, don’t attack the option.
Residents will have an opportunity to voice their opinion on the payday lending industry, and whether you are for this business option or against it speak out and give testimony at SDC’s public hearing on the Payday Loan Industry on Tuesday, March 9 at the Washington Park Senior Center at 4420 W. Vliet Street.
For more information on this event, contact David Celata at SDC 414-906- 2718. Written opinions on this subject are also encouraged for residents to write into: The Milwaukee Courier Newspaper or call Lynda Jones, editor at 414-449-4860. You can also comment on the Courier’s website, www.milwaukeecourieronline.com.