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Letters to the Editor

Not predatory

February 24, 2009

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To the editor:

Independent research shows that the estimated 19 million people a year who access short-term “payday” loans typically use the credit intelligently and as it was intended: as a short-term solution to avoid more expensive fees such as bank overdraft fees, late credit card payment fees and insufficient fund fees from banks and merchants. A recent FDIC study of bank overdraft fees found that such fees may carry an APR of 3,520%.

According to “An Analysis of Consumers’ Use of Payday Loans” by researcher Gregory Elliehausen of George Washington University, “customers used the loans a small or moderate number of times during the past year, typically for less than a month at a time. Such use seems consistent with the intended purpose of payday loans as short-term borrowing to pay unexpected expenses or relieve temporary shortfalls in income.”

Finally, “few payday loan customers considered payday loans as a debt trap. Only about 3 percent of payday loan customers mentioned difficulty of getting out of debt as a reason for being dissatisfied or only partially satisfied with their most recent new payday loan.”

In addition, the Federal Reserve Bank in a January 2007 study found that payday loans were not only NOT “predatory,” but — by providing credit where otherwise there would be none — actually HELP customer households.

Let’s give Kansans a variety of credit options and allow them to choose which are best for them and their families.

Tom Linafelt
QC Holdings,
Overland Park

Comments

Chris Golledge 5 years, 1 month ago

Yes, Linafelt has a vested interest in the matter, but that doesn't necessarily mean that he can't speak on his own behalf, or for others in the same business. How many people bother to speak on issues they have no interest in, financial or otherwise?

While I tend to believe that frequent use of payday loans is a sign of poor money management, there are plenty of folks living on the edge, and they can probably figure out for themselves if they are better off missing a payment or taking a short-term loan. I, for one, would not take that option away from them.

High rates go with high risk; that's just the way it is. Let the market decide. As far as I know, these outfits are too small to manipulate the market and that is when regulation would be needed.

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just_another_bozo_on_this_bus 5 years, 1 month ago

Ah, the conservative mantra-- screw anyone you can.

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jkursman 5 years, 1 month ago

The 19 million Americans each year to whom Tom refers utilize short term loans because they offer significant cost savings versus the average $27 plus interest fee on a $36 bank overdraft according to a recent FDIC study of banks or the average $29 fee on a late credit card payment.

Citizen - The fact is that offering short-term credit, particularly to individuals with challenged credit history, is an expensive proposition. Several traditional banks and credit unions are now offering similar products at a cost of $10 per $100 or with "membership" fees. The terms of these loans run "up-to-30 days" with APRs that BEGIN at 120%. However, the banks automatically garnish a borrower's next direct deposited paycheck often resulting in shorter terms and higher APRs. In addition, those customers who fail to pay back their bank or credit union loans within the 30 day period get hit with an average $27 overdraft fee.

You suggest a 36% APR cap - that would allow lenders to charge only $1.36 per $100 loan, a fee that wouldn't begin to cover the costs of the loan. By contrast, most bank account holders would pay more to withdraw their own money from an ATM. You can't compare annual products like credit cards with short term products. Compare apples to apples; short-term loan fees with those of banks, overdrafting, and late fees.

Do not limit consumer credit options and competition. Working families will be forced to pay the price. "

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bearded_gnome 5 years, 1 month ago

when this comes up, the Google ads: info on child abuse; free sex offender registry!

Google thinks somebody's getting screwed!

but nobody holds a gun and forces these people to walk in to the payday loan shop.

and, LJWorld, I object to the use of LTE space for a business this way. either it qualified for an article with some kinda reporting and interviewing people with other opinions, or mr. QC should take out an ad.

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supernik 5 years, 1 month ago

i wonder if any other company is going to pick up on this free advertising technique

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ArumerZwarteHoop 5 years, 1 month ago

"APR of 3,520%"? They should outlaw stupidity.

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Bowhunter99 5 years, 1 month ago

citizen,

why don't you open up a loan center here in Lawrence base on all of your ideas? based on your logic, it should be very successful and would close other places that charge high rates....

let's see you pony up some of your own money and lend it to complete strangers without any major strings attached and without proper credit checks... I'm sure bozo is also interested on partnering up w/ you...

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Citizen 5 years, 1 month ago

“Independent research shows that the estimated 19 million people a year who access short-term “payday” loans typically use the credit intelligently …”

Except those aren’t the profitable customers. The profitable ones are the individuals who “roll” the loan every two weeks, at 391.07% APR. These folks may not make up the majority of –customers- but they do make up the majority of –loans-.

“A recent FDIC study of bank overdraft fees found that such fees may carry an APR of 3,520%.”

Agreed that the fees for over drafting are outrageous. But that is like saying alcohol is bad for you, and it’s legal, so why not legalize crack.

“Tom Linafelt, QC Holdings, Overland Park”

I understand that you are trying to preserve your job and your livelihood, but take a look around your store. How many of your customers are routine customers—every two weeks? How many of them are on social security and come in on the first of every month to “pay off” one loan, and take out another loan immediately after paying off?

The feds capped interest rates on payday loans to all military customers at 36% APR last year. There is no reason this rate cap shouldn’t be for everyone. Interest rates of 391% APR are usurious and extortion.

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parrotuya 5 years, 1 month ago

The free market is "free" until it collapses and lenders want a bail-out. Which knee-cap do wish to lose first?

More tax cuts please!

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Tom Shewmon 5 years, 1 month ago

Aww heck, even the NYT needs some cash from time to time. If they can borrow $250 million at 14% from a Mexican billionaire, what's a harmless little payday loan for Joe Schmuckatelli?

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/20/AR2009012003988.html

Predatory? Depends on how desperate you are I guess.

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Bowhunter99 5 years, 1 month ago

those opposed against companies like QC holdings should pool up their money and lend it to people they do not know and obviously can't manage their money from one week to the next....

or simple strangers who can manager their money.... bozo.. I need $2,500... when can I stop to pick them up? what's the interest rate? 2%?

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just_another_bozo_on_this_bus 5 years, 1 month ago

" A recent FDIC study of bank overdraft fees found that such fees may carry an APR of 3,520%."

That's a good argument for reducing overdraft fees charged by banks, but not a good defense of payday loan outlets, which only differ from loan sharks in that they don't break your leg if you don't pay up.

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deskboy04 5 years, 1 month ago

What interest rates do these people charge?

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monkeyhawk 5 years, 1 month ago

So, Linafelt, are milking that free advertising cow?

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Chris Ogle 5 years, 1 month ago

QC Holdings, (Quick Credit)

No conflict of interest here.

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jonas_opines 5 years, 1 month ago

Isn't this the free market at work? If people voluntarily take these loans, it has to be okay in every circumstance.

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porch_person 5 years, 1 month ago

Microcredit has been a big winner in India but not at Mafia rates. Labmonkey has it right.

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labmonkey 5 years, 1 month ago

I had "Mack the Knife" running through my head while reading this letter.

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geekin_topekan 5 years, 1 month ago

Are timely repaid loans reported to credit agencies as a positive reference?

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