A terrific Op-Ed printed in our neighbor state Missouri was written by Gerri Guzman who is Executive Director of the Consumer Rights Coalition, a non-profit, consumer based organization. In the Op-Ed, published by the Columbia Daily Tribune, Guzman writes of how a 36% cap would “would eliminate access to many forms of consumer credit at a time when it is becoming increasingly difficult to get a traditional bank loan.”
It continues: “Left without access to credit in today’s weak economy, what options will be left for Columbia consumers if they are unable to make ends meet between paychecks? They can bounce a check, overdraw their bank account, not pay bills on time or, worse, turn to an illegal loan shark or unregulated offshore lender — all more costly and credit-damaging options.”
Guzman urges citizens to consider the consumer side of the story. She cites the stories of: “Kathleen from Carl Junction, a mother of six who recently went through some tough financial times, says: “A short-term loan is what kept my utilities on.” LaWesha, a single mother of three from St. Louis who uses payday loans to keep her household bills and rent paid on time without paying late fees, says: “Without the payday loan option, my rent and bills would fall behind, and it would cause a hardship in my household.”
Guzman also makes a point about how short term, small dollar loans can be superior to other credit options: “Consumers choose short-term loans because they usually are the most cost-effective and least credit-damaging option available. Research shows the vast majority of short-term loan borrowers use the loans moderately and wisely as a short-term solution that enables them to avoid the more costly and punitive options of bouncing checks and incurring penalties for late bill payments. In fact, most borrowers repay the loans on time with no additional charges or fees.”
She also brings up important data about states that have capped payday loans at 36%: “We only need to look at other states with short-term credit bans, such as Georgia and North Carolina, to predict what will happen in Missouri. There, lending bans led to increases in bounced checks, personal bankruptcy filings and complaints about creditors and debt collectors. In states where consumers don’t have access to short-term loans, households pay an average of $200 more in overdraft protection and bounced-check fees than in states where short-term loans are available.”
It’s a great read and again, the whole Op-Ed can be found here.