Payday Loan Writer
The Community Financial Services Association of America, the national trade association for no fax payday advance lenders, is planning to spend $10 million for an advertising campaign that it says is intended to educate people on how to use payday loans wisely.
Payday loans are small loans a borrower promises to repay from his or her next paycheck, usually in two weeks. A $100 loan might have a $15 fee.
Consumer-advocacy groups are critical of these payday cash loans because when the fees are annualized, they often amount to triple- or even quadruple-digit interest rates. The groups argue that the loans take advantage of cash-strapped consumers.
“This is a public-relations act from an industry under heavy fire,” says Jean Ann Fox, director of consumer protection for the Consumer Federation of America.
Industry executives say their campaign is an effort to encourage consumers to use payday advances responsibly. They argue that payday loans are the more affordable route for people who find themselves in desperate need of money.
“If it only cost $10 to bounce a check, I’m not sure we would have nearly as big a payday loan industry,” says Don Gayhardt, president of Dollar Financial Corp., a payday lender. “Payday loans are not predatory. We enhance the economic well-being of people.”
To show its commitment, the trade group is asking members to voluntarily implement new practices. The most notable is an extended payment plan for borrowers who cannot immediately pay back their loan. At no cost, borrowers would be allowed to repay the bad credit payday loan over four pay periods.
I have no doubt the media campaign will be successful. The ad I viewed, which features Darrin Andersen, president of the trade group, has soft music and shows a child with his arm in a sling and a man on the side of the road with a car in need of repair. The message: If you need money to fix your kid’s arm, we’re here for you. If your car breaks down and you don’t have cash, come to us.
Andersen advises that people should use payday cash advances only for unplanned short-term expenses. Borrow only what you feel you can comfortably repay, he says.
Using a credit card to buy things you can’t pay off the next month is bad enough, but to borrow against your next paycheck is the very definition of irresponsibility. It’s an incredibly unwise financial move.
But the payday lenders are right about one thing: They provide a service the people want. Just last month, 15 million people took out pay day loans, according to Gayhardt. “I think consumers understand the bargain they get with a payday loan,” he said.
But, you know, not every bargain is a good buy.
SOURCE: The Denver Post