Payday loans

The NY Times has a discussion of payday loans, and whether and how they might be regulated. (See also my previous posts on payday loans.)

The Allure of Easy Money

INTRODUCTION

Kevin J. Miyazaki/Redux for the New York Times

In his State of the Union address, President Obama presented a series of initiatives aimed at the middle class and the growing income inequality in the United States.

One thing on the minds of many working-class Americans is greater federal regulation of payday loans, the small, short-term high-interest loans that are currently under state jurisdiction. Critics of payday loans say they lead to a cycle of ballooning debt for consumers, who can rarely afford to pay them back and must take out more loans to stay afloat. But payday lenders say that strict rules would eliminate the industry and with it, the only viable lending option for people with bad credit.

Should payday loans be federally regulated?

READ THE DISCUSSION »

DEBATERS

• 

  Help Level the Playing Field for Desperate Borrowers

  VALERIE WILSON, ECONOMIC POLICY INSTITUTE
  Ban predatory interest rates. Make borrowers account for the ability to repay. Limit duration of debt and restrict lenders’ access to bank accounts.
• 

  Don’t Restrict Access to Credit

  DENNIS SHAUL, COMMUNITY FINANCIAL SERVICES ASSOC.
  Regulation already exists for legitimate payday lenders. In more than 30 states, there are already strict limits on loan amounts, fees and rollovers.
• 

  One Size Won’t Fit All

  LISA SERVON, PROFESSOR OF URBAN POLICY
  Research about whether these loans are helpful or harmful is inconclusive, and most of it lumps all borrowers together.
• 

  Regulations Can Help Improve the Market for Borrowers

  RAJ DATE, INVESTOR
  Technological innovations will draw customers who use payday loans to cheaper products, like credit cards and installment loans, that better meet their needs.
• 

  End Predatory Practices

  GARY KALMAN, CENTER FOR RESPONSIBLE LENDING
  New rules must keep predatory lenders from pushing consumers into increased risk of losing bank accounts, their foothold into the mainstream financial system.
• 

  Let Banks and Nonbanks Play by the Same Rules

  JAMIE FULMER, ADVANCE AMERICA
  The Consumer Financial Protection Bureau must establish consistent guidelines for the entire marketplace, creating healthy competition.