Short term loan borrowers have rights. They have the right to know how much their loan is going to cost them. They have the right to return the money they borrowed by the end of the day if they want they changed their minds. They have the right to know regarding dispute resolution. The witty thing is they have the right to know so much, that nearly all payday loan places will hand you a couple pages of fine print on your rights and have you sign something at the bottom saying you surrender your right to a jury trial and you do so knowingly. Regardless of the volumes of details payday loan places provide, people find themselves going to payday loan stores and signing on the dotted lines anyway. It makes one wonder whether knowing is enough. How may one know and yet take decision of something that has been compared to usury? Is it lack of knowledge, lack of concern, or something else altogether which keeps the industry in consumers at such a rate that the business seems to be successful while other businesses are struggling?
To say the matter raises questions is an understatement. It’s tough to have sympathy for an industry that seems to have flourished while the country is experiencing one of the toughest monetary disaster in current memory. The payday loan industry has definitely profited, having become in fact, “$28 billion industry nationally, according to the Center for Responsible Lending” (Associated Press, 2007). As the industry develops, it leaves us wondering how human would willingly pay 480 percent. Ray Fisman, in The Dismal Science, puts the query “Do individuals take out payday loans as they’re distressed, or as they don’t understand the rules?” What Fisman almost asks but doesn’t is are individuals stupid or don’t they understand that one $500 loan from these organizations potentially costs them $2692 a year? These seem to be the same individuals who then blog questions like, “Is my payday loan place going to have me in prison? Are these businesses preying then on the stupid?
Yet, nobody is forcing them to go. Or are they? It has been suggested that our present economic crisis has made it nearly impractical for the average person to get a loan in any other manner. In response to the push for more stringent borrowing practicing, traditional banks are turning away traditional borrowers. Perhaps it is not a coincidental connection between the push by banks to be stricter and the responsiveness of the fringe industry to develop as a conclusion. payday loan lenders aren’t stupid. Like every belligerent kid, they understand there is a limit to how far you can push until you get, proverbially, smacked in the head.
President Obama has made a point of declaring that America, to be financially strong, must be capable to have credit. If this is the case, we are looking at a new wave of Americans who have been forced out of the credit game, disenfranchiseed by a banking industry which was careless enough to loan to irresponsible customers forcing mainstream America to choose an even stupider path.
