Pros And Cons Of Payday Lending

New York's Payday Lending Ban

New York's Payday Lending Ban

Ordinary people in New York who have less-than-perfect credit face regulatory pressure to do what politicians decide is "good for them" as free enterprise, self-determination and the rule of law take yet more hits from “well-meaning and concerned” politicians and the big banks. Despite overwhelming evidence showing that ordinary working people from the lower end of the economic spectrum support and rely on payday loans in overwhelming numbers, politicians and established lenders continue to chip away at the industry because it's an easy target. This conflict between what people want and what politicians do "on their behalf" for political advantages is astonishingly clear in New York

Two Sides to Every Conflict

There are always two sides in any conflict, and New York's payday lending ban shows the truth of the classic proverb. The first argument against New York's policies regarding payday loans is the most important -- people support and use payday loans in overwhelming numbers because many of them have bad credit, no credit and no resources in financial emergencies. Payday loans are so popular in the United States that there are now more payday lenders than McDonald's franchises in the country despite bans in states like New York.

Answers to New York's Reasons for the Ban

Payday loans are meant for financial emergencies, and the industry supports responsible use of short-term loans. It's undeniable that people become trapped in cycles of debt, but this also applies to traditional loans, credit cards, auto financing and home mortgages. The banking industry's mistakes during the mortgage crisis of 2008 are well-documented, but attacking the payday loan industry refocuses consumer outrage against traditional lenders to an easy-to-attack scapegoat: payday lenders. Regular New Yorkers -- which includes students, veterans, retirees and people who've made a few mistakes managing their credit --

People who qualify for "low-interest" loans only do so after spending thousands of dollars in interest during their lifetimes. Low-interest loans have longer repayment periods than emergency payday loans, so banks and other traditional lenders earn huge commissions over time from people who have demonstrated that they always pay their bills. Payday lenders process smaller loans for very short periods of time, and offering loans to people who have lower credit ratings means that more borrowers don't repay their loans. Ironically, New York State actively encourages its citizens to default on their payday loans.

The New Economy Project in New York promises to build a new economy that's fair to everyone based on cooperation, racial justice, economic sustainability and democracy while ignoring what its citizens really want and encouraging policies that disenfranchise New Yorkers who come from poorer economic and minority backgrounds. An article on the American Banker website warns of the dangers of banning payday loans because it destroys an essential lifeline for millions of people.

There are always different sides in any controversy, and regular working people -- and even high income earners -- lose an important resource when they're not allowed to choose whether to get a payday loan