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| Decatur, Ala. | Sunday, May 19, 2013 |
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3/13/13
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1632 views
Letter to the editor
Look at numbers on pay-day loans
To The Daily: I feel compelled to respond after reading Kathy Rice's March 6 letter to the editor "An affordable credit option." In her letter, Rice, division director of operations, Advance America, defends "payday lenders and short-term lending's important role in many families." She states her company provides an "affordable credit option" and does so with a "flat, reasonably priced fee that does not compound interest — whether a customer repays their loan in three days or 30 days." She goes on to say clients pay a $17 fee per $100 borrowed. She also says that 90 percent of her company's customers pay their loans on time.
If you do the math, you'll see this company can lend that same $100 on a three-day loan 121.67 times per year. On a 30-day loan, they can re-lend that same $100 12.16 times per year. So, if they lend it every three days, the annual fees are $2,068.33 on that $100 and if they get paid on time, 90 percent of the time, then their annual yield is $1,861.50 on a $100 loan. If you do the same math for a 30-day loan, their yield is $186.15 on $100 loaned out every 30 days all year. I doubt loan sharks or bookies make that kind of return on each $100.
Nicholas B. Roth
Decatur
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No one makes anyone borrow at these places. The number of them would indicate there is a need and limit of the mentality of those that frequent them.
The notion that society, or its government, should dictate private sector profit has its basis in the writings of Karl Marx, and runs completely counter to American free enterprise. High risk, that is to say loaning money to the uneducated poor, carries with it high interest. By omitting any reference to the exceptionally high risk, much like Decatur Daily articles, Mr. Roth's analysis is far from complete. It is not coincidental that many of those who criticize the payday loan industry are its patrons.
Mr. Roth is ENTIRELY correct. PAYDAY and TITLE PAWN LENDING is nothing but a LICENSE TO STEAL. Lenders in the title pawn and payday loan industry are doing nothing but an end-around the Alabama Small Loan Act and Alabama Consumer Credit Act. Ask any payday or title pawn lender what their average rate of return on investment is on each shop they operate.
The last time I looked, to be uneducated or poor was not a crime. Even they have financial needs and most are hard working folks and pay their bills on time. Under the methods of lending by title pawns and payday loan lenders, the single emergency loan is only the basic lteaser oan to get one hooked - it is the rollovers and the refinancing multiple times where the real money is made. Look at the statistics on the payday loan and title pawn borrower - the high levels of education and net income. Why would the borrower criticize the source of their funds funds if they did not know that they were the subject of predatory lending. It is just like a drunk going to a bootlegger for high whiskey - It is a no-win situation for the borrower - once in there is no way out.
Casino's give a better rate than that! Don't believe me call them and ask if you get a line of credit how much would it be.
Heck they will loan you money ie Marker for 0% due in 30 Day's.
does this state not have usury laws? how is this even legal?