Clarifying the short-term loan industry

Saturday, July 12, 2008

I read with interest Stephen Franklin's June 29 article entitled "Interest still high in payday battle." It was one of the few news stories about the short-term loan industry that was not completely one-sided. It sourced responsible borrowers who use the product as intended, rather than simply "consumer advocates" who are working to abolish the short term loan industry.

While I applaud the attempt to address both sides of the issue, it was not totally accurate. The article stated that the installment loan industry is unregulated, which is far from the truth. Both installment and payday lenders pay hundreds of thousands of dollars annually for loan licenses and store audits. We are also subject to the Federal Truth in Lending Act and other consumer protection laws.

The article further discusses how some firms don't do credit checks. Customers come to installment lenders, in part, because they are turned away by other lending institutions due to less than perfect credit. All of our customers have a job and bank account.

If we are constructively regulated out of business the only options for Illinois consumers will be unregulated internet loans with rates double and triple the current interest rates, or (according to a 2004 Woodstock Institute study) bank overdraft fees at rates averaging between 1000 and 3000 percent. How is this better for anyone?

The 37-year-old nurse said it best when she said, "There are a lot of people out here who have no other place to go." If the consumer groups convince the Illinois legislature to wipe out the installment loan industry where will these people go when they can't make ends meet? We care about our customers and do our best to keep interest rates reasonable and non-abusive. In fact, we supported the states recent (but unsuccessfully) proposed fee cap of 55 cents per $100 per day for installment loans. This would put an end to excessive interest rates while still giving consumers access to a viable loan product.

Source: http://www.chicagotribune.com