Payday Advance Company Employee Defends Practice
A payday loan employee recently wrote in to the Daily Press in Virginia regarding the use of cash loans…
A July 12 letter, “An interest- rate fix,” seeks to further the misguided perception that payday customers routinely convert our product into long-term debt.
As a long-standing employee of a payday advance company, I can say with certainty that nearly all of our customers use these short-term loans responsibly. And they are dutiful about repaying the loans within the specified time period. Virginia regulations do not allow customers to roll over their loans, so the interest is not compounded and does not result in long-term debt.
The letter writer also urges a 36 percent APR cap for faxless payday loans, and incorrectly believes that “legitimate lenders have no problem” operating under such a restriction.We could not stay in business with a 36 percent APR cap — the equivalent of less than $1.40 per $100 advanced. In fact, many of our customers choose our service in part because other financial institutions find it difficult to offer short-term, unsecured loans.
The truth is our customers know what it costs to borrow money, and compared with the fees connected to bouncing a check, paying a credit card bill late and even many ATM withdrawal charges, it costs less to get a pay day loan.