The following is a Letter to the Editor of the Virginia Daily-Press…
Reference “Let’s develop alternatives to payday loans,” June 23, by Ward Scull and Mike Lane. Far from “trapping” customers, payday advance companies each year help thousands of Virginia families overcome unexpected financial circumstances.
When an air conditioner breaks or a car battery dies, payday lenders provide convenient access to small amounts of money to cover those costs. Banks don’t - they instead make billions on bounced checks, “overdraft protection” and other fees. Faxless payday loan customers wisely avoid these more costly alternatives.
While critics, including Scull and Lane, have rushed to label payday lending as “predatory” without ever having defined what “predatory” means, recent studies show that by extending credit where there would otherwise be none, payday loans are not predatory but instead actually help the households they serve.
Further regulation of personal cash loan lending has the adverse and unintended consequence of reducing credit options for those who may have few alternatives.
Policymakers should encourage competition in the small loan market as competition controls prices. The vast majority of payday loan customers pay their loans back on time. For the small minority of customers who find difficulty meeting their loan terms, responsible lenders offer extended payment plans that provide more time to repay their loans at no extra cost.
Let’s give reasonable, hard-working Virginia consumers access to a variety of regulated credit options and trust them to make financial decisions based on what’s best for their families.