The House Committee on Financial Services recently had a hearing to discuss the Obama Administrations maneuvering and attempts to wage war on the short term lending industry. The Consumer Financial Protection Bureau (CFPB) was created because of the passing of Dodd-Frank and has been on a mission since day one to wipe out short term, small dollar lending companies. Additionally, the bureau seeks to destroy as many of the online lending choices that American consumers currently have access to.
The attack on these lending industries is a clear cut case of government overreach and just another case of the government working in cahoots with the big banking industry. People who have a grasp on credit understand that higher risk borrowers are always going to pay higher interest rates/additional fees. That’s just the way it is, and that is what small dollar lenders build their businesses upon. Those who do not like the short term lending industry seem to fail to realize that without the services these companies provide, millions of people would suffer. Getting rid of short term lending might put an end to higher interest rate loans, but it would also eliminate access to credit for millions of people. Folks who need to get their cars repaired or pay for medical bills, but who are unable to get a loan at the bank would just have to do without. That is simply not an equitable equation no matter how you slice it.
Though many media outlets have been in the practice of demonizing payday lenders the simple fact is that these unique lending companies provide a much-needed service to the consumers they provide loans for. And despite what the CFPB says, the states that allow these types of loans already do a good job of regulating the industry at a statewide level.
Consider the story of Robert Sherrill’s experience with payday loans. He was, in a former life, a drug dealer. He did time in prison, and sought to turn his life around when he got out. Robert could not get a good job, so he decided to start his own business. Unfortunately, he could not get a loan for the small amount of startup money he needed from traditional lending venues. He winded up getting a payday loan to get his business going.
Fast forward to today, and Robert’s company is a success. He employs 20 people and the business continues to grow. Sherrill has joined his local chamber of commerce and is a productive member of society. Robert’s story is one of true American success. However, without the money he got from a payday lender, he may not be enjoying the success he so rightfully is enjoying right now. That’s why Robert testified before the committee to tell them all about how a simple small dollar loan managed to help him get his life moving in the right direction.
There are, without doubt, plenty of stories similar to Sherrill’s that the mainstream media will never tell you about. But the moral of his story continues to ring true: Small dollar lenders provide a financial lifeline for consumers who have no other options. Whether it is a lender providing enough money to help someone fix their car and continue working at a good job, or a lending company providing a small loan that helps a budding entrepreneur start a successful small business, the fact of the matter is that the small dollar lending industry is extending financial services to people who have no other viable borrowing options.
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