Payday Loan Times

Here is a recent, paraphrased letter to the editor of The Olympian:

I agree with condemning payday lenders who violate state laws governing that industry. The Department of Financial Institutions vigorously enforces those fast payday advance laws, as a Jan. 12 editorial describes.

That editorial goes astray, though, with its blanket assertion that all “payday loans prey on the poor.” It confuses fixed fees with annual percentage rates by referring to 391.07 percent interest rates.

That sounds terrible, until you realize lenders offer, at considerable risk of default, and with full terms’ disclosure, unsecured loans with fees of $15 or less per $100 borrowed. I may never take out such quick cash loans, but would also never want to be in the risky business of offering them.

Although The Olympian calls upon banks and credit unions to offer more access to short-term loans, consider market realities: These are risky, entirely unsecured loans, and credit unions testified in December that if the Legislature lowers fees, it would be impractical to offer such loans.

So, a regulated financial option that generates very few borrower complaints to DFI, and provides Washingtonians access to over

$1 billion in loans annually, would be eliminated by proposed legislation. What then for the poor? Resort to unregulated online payday loan lenders or loan sharks?

The Olympian’s compassion is commendable, but I would refocus it upon root causes of poverty, including Wal-Mart - which does more than any other company to exploit poor people - or a Bush administration that devalues military service by paying military enlistees as little as $14,446.80 a year, putting them into desperate economic hardship.

Brendan Williams, state representative, 22nd District.