Archive for May, 2010
Responsibility is Underrated
Personal responsibility and accountability seems to be a notion of the past. Why not take any responsibility for your own actions when you can so easily blame someone else for your mistakes, miscalculations or ignorance? We blame fast food businesses when we get fatter, we blame schools when our kids are failing, we blame the lender when we borrow more than we can pay back., we blame cigarette companies for our declining health, we sue McDonald’s because their mascot entices children to eat their food…seriously…what gives? Blaming others for our mishaps is so common place it’s practically a cultural phenomenon. The government can require all regulated industries to post every possible warning and combination of warnings that can be considered and you’d still have activists and politicians claiming that people are being unfairly charged or forced to consume 5000 calories a day in sweet, sugary treats and sodas. They’d also have you believing that gluttony isn’t a personal choice and borrowing is an illness or personality disorder. While temptation does exist, as human beings, we have the ability to problem solve and the capacity to educate ourselves for the purpose of making what we believe is the best decision. Instead, we take what’s known as the path of least resistance. Just do it…and blame someone else when you don’t receive the desired outcome. Then we’re relieved of all guilt, shame, accountability, and liability. Great! Right? I would say most certainly not. How long before we become this litigious, self-consumed, finger-pointing society or are we there yet?
Senator Hagan in all of her infinite wisdom had a method of persuasion that included telling the story of a woman whose $200 payday loan escalated into $8,000 in fees and six different loans. Of course this is probably the most extreme example that Hagan could find in her repertoire but it’s still a “true” story. Unfortunately, my thought wasn’t,”oh poor woman…how dare those lenders lend her the money that she asked them for because her husband was unemployed.” I’m sure this is the reaction she was hoping to get from her audience. Instead, my first thought was, “why would anyone take out five different loans if they didn’t have the means to pay back the first one?” My second thought was,”where would she have gone if payday loans weren’t available?” This story only proves that there is a need for short-term credit and it’s unfortunate that people will use payday loans when they need them but scream bloody murder when they get themselves in over their head.
In all honesty, how concerned would politicians be about consumer access to credit (or lack thereof) if there weren’t any institutions offering short-term services? I’m not saying that political interests influence all decisions but more often than not, in my opinion.
Fabricating and Sensationalizing
Apparently, there is an entirely new extreme that payday loan “haters” have established in an attempt to validate their opinions. Okay, maybe it’s not so new, but it’s certainly extreme. Creating false associations and spewing misinformation for the sole purpose of making the industry look undesirable is as low as it gets. If you’re a consumer advocate and you maintain that the industry is despicable, then why is there a need to create falsehoods in order to prove your point? It certainly wouldn’t make your points any more valid and in fact would make you the lesser reliable source. Comedic relief-yes…reliable source-most definitely not.
The Predatory Lending Association, which, by the way isn’t a real organization, appears to have spent a lot of resources developing a website to mock the Community Financial Services Association of America. I’m kind of disturbed that they didn’t focus any of their resources on actually educating individuals on how not to get into a bind or offering information on general financial literacy topics. Instead, the website calls payday loan customers “poor” and claims that lenders disproportionately target minorities. Nevermind the historically uneven distribution of wealth stemming from once acceptable discriminatory practices such as redlining. But I’m sure the topic of why the distribution of wealth is so uneven will never be revisited or discussed by “organizations” such as the Predatory Lending Association. The website doesn’t appear to have been updated in three years. You should check out the site at http://www.predatorylendingassociation.com/ and let us know your thoughts.
“Haganism”
Ha-gan-ism n. 1. -the state of being Hagan 2. -to support or believe that the extreme limitation of short-term credit will result in an improved lifestyle for consumers. 3. -to insist that banking overdraft fees should not be limited, as they are a greater alternative than short-term loans.
Most of us who stay abreast of the happenings on Capitol Hill and the shenanigans relating to financial “reform” are aware of the Hagan Amendment 3744 which proposes to limit short-term loans to 6 or fewer in a 12 month period. The need to protect consumers in light of the financial crisis and continued lack of confidence from consumers is completely understandable. However, I have an increasing concern that politicians have no knowledge of the complexities of business…profit, loss, risk, cost-benefit, supply and demand etc., nor an understanding of consumer wants and needs. Further restricting access to credit in my opinion isn’t meeting anyones needs and will benefit no one. Of course, that doesn’t mean that reform isn’t welcomed by the payday industry as you’d probably be lead to believe by consumer advocacy groups founded by the Sandlers-whom-by the way-were on Time’s list of 25 people to blame for the financial crisis. But I’m sure I’ve mentioned that before. Again, the opposition stems from every reform measure involving either dramatically decreasing the availability of credit (which hurts the consumer) or drastically decreasing the APR of short-term loans. The irony is that no resources are being dedicated to the mandatory availability of financial education resources to consumers. In addition, no matter the limit placed on loans, there will still be an applicable APR per federal guidelines. Since much of the hoopla about payday loans is based on the associated APR and not fees, I have a feeling that the opposition will still not be satisfied.
That being said, are these amendments just for show and tell or are there actually considerations as to how they will affect the current financial climate and economic atmosphere? Or maybe there is some consideration but an absence of sincere concern unless there is a major stakeholder in the senate. Why is 6 the magical number in a 12 month period? If Hagan’s goal is really to protect consumers then shouldn’t the number of overdraft services extended per customer, per year be included in her definition of covered loans?