Here is a report on the cost of doing business in the short-term, unsecured market: http://www.reuters.com/article/pressRelease/idUS106466+13-Oct-2009+PRN20091013

If you can figure out a way to offer a two week loan, whether its payday lending or some other way, at a 36 percent APR, then you have done something amazing. Credit unions sometimes offer short term loans with much smaller APR, but they are usually backed up by other loan fees and membership charges.

Also, when you use that APR system on fees and short-term loans, it balloons the figures. Consider the FDIC reports that bank overdraft can exceed 3,000 percent APR in some cases. http://www.fdic.gov/bank/analytical/overdraft/

Thank you for your constructive debate and offering this forum.

I’m not suggesting legislation killing the payday-lending industry. What I’m suggesting is a level playing field for lenders that in itself protects low-income consumers from having to pay much higher rates of interest for short-term loans than all other blocs of consumers have to pay for their lending needs.

The payday-lending industry dresses up what it does as that it’s providing a service. I would suggest that it needs to figure out a way to provide the service using the same interest-rate structure that everybody else has to offer.

I do applaud you Mr. Graham for publishing the letter by the Consumer Freedom group even though you clearly oppose their view.

I would really be interested in hearing your view on how to best adequately serve the short-term credit market. I really don’t think the 36 percent rate you mentioned works. That pretty much kills all short term credit, as the Dartmouth suggests.

Its purpose is to inform, educate and instill vigorous and ethical debate on the issues of the day affecting our readers.

The AFP is not a bank, credit union, credit-card company or other kind of financial institution. It is not owned by any such institution.

Curious – what is Ryan458′s purpose? The Ryan458 name popped up in a Google search this morning commenting elsewhere on the payday-lending issue. That’s why I ask.

- An article in the New York Times Magazine last year highlighted the difficulty for many Americans of accessing consumer credit. It took a balanced look at the services offered by short-term payday lenders and found them to be a valuable financial service because they offer easy-to-understand conditions with “no surprises, no hidden fees,” unlike many banks.

On the heels of the Times’ article came a Dartmouth College study looking at a 2007 payday lending ban in Oregon. That study concluded that banning financial options ended up hurting Oregon borrowers and forced them to turn to inferior substitutes like bounced checks and overdraft fees.

Adults are best served when they can choose among many competing financial options.

SAMANTHA O’NEIL

Center for Consumer Freedom

Washington

Link – http://bit.ly/23h5Xm.

And then this from a letter published in the Springfield News Leader on Dec. 4, 2008:

- Two weeks ago, an article in the New York Times Magazine highlighted the difficulty of accessing consumer credit facing many Americans.

The article took a balanced look at the services offered by short-term payday lenders, finding that payday loans are a valuable financial tool since they offer easy-to-understand conditions, with “no surprises, no hidden fees,” (unlike many banks, which are offering these same kinds of loans but without being demonized by media and political elites).

On the heels of the Times article came a Dartmouth College study looking at a 2007 payday lending ban in Oregon. They concluded that banning financial options ended up hurting Oregon borrowers, and forced them to turn to inferior substitutes like bounced checks. Borrowers are best served when they have more choices to pick from.

Tim Miller Center for Consumer Freedom, Washington, D.C.

Link – http://bit.ly/1pshPI.

It took some searching, but I finally found a link to the article in the NYT Magazine. Link – http://bit.ly/12zM6J.

It’s good reading. It’s also long. Scan it, and you might get the same sense that I do. It did give a balanced look at payday lenders in the context of banking services for low-income Americans available in the traditional banking and credit industries. And the final analysis is – payday lenders, banks and credit companies all fail to adequately serve that market.

The Dartmouth study appears to be legit. Link – http://bit.ly/1j7F58. It also gives a balanced view toward payday lenders in the context of the overall banking and credit market.

The bipartisan push to restrict payday lenders to a 36 percent APR is one we have long championed here at the AFP. That push is what we are shilling for.

This letter by the Center for Consumer Freedom is not much opinion. It’s pointing out research by The New York Times and Dartmouth College. How does that not seem fair?