DISQUS

You, Mr. Lillis - and the New York Times - are enemies of humanity. You are proponents not of consumer protection but of authoritarian legislation which will hurt both consumers and businesses (except banks, which will profit when payday lenders are gone because people use payday loans to avoid their high overdraft and NSF fees).

Usury laws are un-American, because we are supposed to have an unalienable right to life, liberty and the pursuit of happiness as long we don't infringe on the equal rights of others to the same (as you are trying to do). That means freedom of commerce, sir, the right of citizens to engage in mutually-agreeable commercial transactions where dangerous goods are not involved. It means the right of independent merchants and service providers set their own prices, in accordance with market conditions, and the right of consumers to decide for themselves which honestly advertised products and services they wish to avail themselves of.

Consumer protection is not about telling businesses how much they can charge - or limiting consumers choices to only those products and services which you think are wise choices for them. It is about curbing dishonesty in the marketplace, and providing consumers with information to help them make better choices.

But professional critics like you with no regard for the principles of freedom which our country was founded on - and no regard for the truth about relatively-high-interest loans for people with bad credit - have perverted consumer protection in their zeal to be the "good guys."

You cannot look at the APR of a loan in a vacuum and think that you can draw an APR line between a loan that is useful for consumers and one that isn't. That is nothing but a myth, a superstition based on antiquated religious concepts - and the current persecution of payday lenders based on the APR of the loans is in fact no different than the Salem witch hunts of several hundred years ago.

If a 365% APR was "outrageous," then the statement "I will lend you $100 today if you will pay me back $101 tomorrow" would be an outrageous statement, but it obviously isn't. In fact, most people would not make that statement - especially to a stranger with bad credit - because they wouldn't want to risk losing $100 for just $1 in profit.

A 36% APR cap would make it illegal, in the United States of America, for any citizen to say to any other, "I will lend you $100 today if you will pay me back $100 and ten cents tomorrow." That isn't consumer protection, buddy, that's insane authoritarianism.

A 36% APR is not always better than a 391% APR. A two-week payday loan of $100 at 391% will cost you a grand total of $15. By contrast if you took out a six-month $100 loan at 36% and fell prey to the temptation to wait until the end to pay it back, you'd end up paying $18, 20% more. The longer-term 36% loan is of course a better deal overall, but people with bad credit cannot be profitably offered a six-month loan at 36% APR, because the default rate will be way too high.

The people whom you claim you want to protect are not asking for protection in the form of having options taken way from them. They don't want payday lenders put out of business by a law that requires the loans to be offered for a fraction of what it costs to issue them. They want payday loans to be available because they are a lifesaver for some people, saving them eviction or from losing their job when they need to get their car repaired quickly, and they are a useful financial tool for others, saving them from paying more money than the loan costs in late fees and bank charges.

Taking out any loan is of course a gamble, and for some payday loan customers - and especially those who borrow irresponsibly - the gamble doesn't pay off. But customer satisfaction surveys - and the fact that millions of people continue to use the service - testify to the fact that overall it's an important option for people to have, despite the fact that some people need to learn from experience to be more cautious in their use of it. Many people also need to learn to be more cautious in their use of ice cream and other high-fat foods, but that is no reason to ban those foods which would punish those who use them responsibly.

The payday-loan service would also be improved if the lenders weren't operating within very narrow exemptions to ridiculous state usury laws. For example, people who know from the start that they won't be able to repay the entire loan on their next payday should be able to sign up for an installment payday loan instead, whereby the loan is set from the start to be paid back in installments over several paydays. Lenders could offer installment payday loans at a lower APR than regular payday loans because they would be receiving interest for a longer period of time and would be spared the costs of processing the refinance or new loans of customers who need more time to repay, as currently occurs.

There is no reason whatsoever why a free market in loans is not the best solution to meeting the credit needs of consumers. Yes, there should be strong regulations to make sure that consumers are not deceived in any way and understand exactly what they are getting into - and lenders should of course be required to strictly comply with debt collection statutes - but beyond that freedom, believe it or not, works best for all involved.

But it doesn't work best for professional critics and moralists, who feel that they should be the ones to decide how everyone should behave. As people like you gain more and more influence, Mr. Lillis, the United States looks more and more like the People's Republic China.

What is scandalous and outrageous is that opportunistic politicians, activists and reporters, looking for a target to criticize to advance their careers, are presenting this issue in a distorted and biased way. The APR of a loan is a statistical tool which has one use and one use only - to compare loans which you have access to. If all other factors are the same, choose the one with the lowest APR. But payday loan customers, due to their bad credit rating, by and large do not qualify for longer-term loans with lower APRs, so a payday loan is often their only alternative to being evicted, losing their job because they can't get their car repair quickly, having their power turned off, or simply paying more than the payday loan will cost them in bounced-check and overdraft charges, credit card late-payment and overlimit fees, etc.

The critics of payday lending, in complaining about "outrageous" triple-digit APRs, fail to mention that about 90% of the fees payday lenders charge go towards covering the costs involved in issuing the loans. Payday lenders are not making a triple-digit return on their investment, as the filings of the publicly-traded payday-loan companies very clearly show. Their ROI is in fact less than many Fortune 500 firms.

The payday loan critics are so gung-ho to crucify the industry that they have no respect for what should be unalienable rights. If the government can tell lenders how much they can charge, then why can't it tell all doctors, lawyers and free-lance maids how much they can charge as well? Should all lawyers should be limited to charging $36 per hour instead of the "outrageous" $300-500 per hour which so many of them charge now? Soon we will have a society where all economic activity is controlled by politicians and those who bribe them.

Usury laws are an authoritarian infringement of freedom of commerce, a tradition based on antiquated religious concepts, which should have been abolished along with the tradition of slavery. Many of the problems associated with payday lending are due to the fact that the lenders are operating under a very narrow exemption to the state usury law and cannot tailor the product to meet individual needs.

The most important statistic is contained in customer satisfaction surveys, which show that the overwhelming majority of payday loan borrowers consider the loans to be a useful financial service. See http://www.cfsa.net/customer_demand.html

That tells you a lot more than the APR or statistics on how often people use the service. If someone uses the service frequently that doesn't mean he has been preyed on, as the critics claim, it could just mean he is having a hard time making ends meet and uses payday loans frequently to save money on bank overdraft and other late-payment fees which can have an APR 20 times higher. See http://www.cfsa.net/OverdraftProtection.html

The customer satisfaction surveys sure seem to indicate the latter.

If payday lenders "prey" on people who are financially strapped - by offering an option which, although somewhat expensive (mostly because providing the service is expensive) may be the best option they have - then doctors "prey" on people who are sick. And remember that a lot of people get bad results from using doctors. Iatrogenic illness (i.e. hospital infections and side effects from prescription drugs) is one of the leading causes of death in this country. But most people still go to doctors because overall they do more good than harm. And in the absence of any government agency or private charity that people can turn to when they have an emergency or immediate need for funds, payday lenders do too.

The bottom line is customer satisfaction surveys. When a large majority of people who have used a service report that they consider it to be a useful option, then that service is doing considerably more good than harm and the government should LEAVE IT ALONE. Such surveys can be seen at http://www.cfsa.net/customer_demand.html

Breathtaking revenue, my ass. It's a matter of public record that payday loan companies make a considerably smaller return on their investment than banks and many other kinds of businesses. You idiots just can't seem to understand that "triple-digit interest rates" doesn't necessarily mean a huge markup on the product.

If I say, "I will lend you $100 today if you will pay me back $101 tomorrow," that's a 365% interest rate but is it really an outrageous statement? It obviously isn't, and in fact most people would not make that statement because they wouldn't want to risk losing $100 for just $1 in profit. And that doesn't even consider any cost in making the loan!

It costs money to issue a loan. The employee who interacts with the customer for 15 to 30 minutes has to be paid. Then there's rent, utilities, database checking, and in addition the cost of the loan has to make up for all the loans which some people just don't repay. At 36%, a lender could only charge $1.38 for two-week $100 loan. That's why there are no more payday loan stores in North Carolina and the people who used to get payday loans there are now paying more money than payday loans used to cost them in bounced check and overdraft fees, credit card late payment and overlimit fees, or Internet payday lender fees which are generally more expensive than the stores were. And that's just the lucky ones. The unlucky ones have been evicted or lost their jobs because they couldn't get their cars repaired. Children may have been evicted in the dead of winter and died because of fools like you who want so much to be one of the good guys that you are blind to the destructiveness of the reforms you dedicate yourselves to implementing.

If you want to help the small percentage of payday loan customers who can't resist the temptation to overborrow and get themselves into a debt trap then lobby the goverment to provide them with no-profit loans or free credit counseling, work to make the industry properly regulated so it is certain that every payday loan customer completely understands the charges and the potential consequences of not paying the loan back, go into the business yourselves and charge less if you still think that small-dollar short-term loans (the only type of loan that people with bad credit can qualify for) can be issued profitably for a lower APR - but don't trample on what should be the inalienable right of a merchant or service provider to set his own price (if he doesn't utilize limited public resources in the operation of his business) and the inalienable right of a consumer to decide for himself which products and services he wishes to avail himself of. This is the United States of America, supposedly the land of liberty, and if I want to sell my autograph for $10,000 on eBay I should have a right to do so, even if some fool throws away all his savings on it.

There are still payday loan stores in Oregon, Eric, because their law allows a 10% (of the amount borrowed) loan origination fee in addition to the 36% interest, while the New Hampshire bill that was just passed does not. This bill will end short-term loans in New Hampshire because the lender could only charge $4.14 for the average $300 loan and the costs involved in making the loan are about seven or eight times that.

Translating payday loan fees into an annual percentage rate tells you nothing about how profitable the loan is for the lender, because it ignores the cost of making the loan, and it tells you nothing about how wise the transaction is for the consumer, because it ignores what other alternatives are available to him.

Of course some people get themselves into trouble by their own misuse of payday loans. That is the case with every good thing, including cars, wine, desserts, you name it.

Not wanting to admit they were wrong, the New Hampshire legislators - and Gov. Lynch who says he will sign the bill - ignored the recently-released study by
researchers from George Mason University and Colby College which found that "access to payday loans in their environment, all else fixed, increases a borrower's probability of financial survival by 31%." See http://www.foxbusiness.com/article/researchers-...

The critics of payday lending are rebels without a cause, and they are in the process of taking away from the people of New Hampshire a valuable financial option.

This is a biased article, as can easily be seen by use of the word "predictably" in "Meanwhile the payday loan industry released results of its own survey that predictably claimed a clear majority did not want the Legislature to ban these loans."

This implies the poll was somehow fudged, whereas it was performed by Zogby International which has no interest in the payday loan industry. Just because the industry paid them to take the poll doesn't mean the results are skewered.

It's a biased article that doesn't talk about the academic studies that show payday loans are generally a good thing, even though some people get themselves into trouble by their own misuse of them - as is also the case with cars, wine, desserts, and many other good things.

A 36% cap on loan rates makes it illegal for any New Hampshire citizen to say to any other, "I will lend you $100 today if you will pay me back $100.10 tomorrow." Is that the land of the free and home of the brave?

Consumer protection should be about curbing deceptive advertising, not telling merchants and service providers how much they can charge.