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From the lender’s perspective – Leah Gonzalez, day 10

December 17th, 2012 at 7:00 am

(This is the final guest blog post by Leah Gonzalez, a master’s degree student in social work at the University of Texas in Austin.)

Just like there are individuals behind each story of extraordinary debt caused by payday and auto title loan, individuals make up the industry, as well.  It wouldn’t be fair to disregard what members of the payday and auto title loan industry have said in defense of their business.

A major concern of payday and auto title loans is how long a borrower is in the debt cycle. The loans are designed to be short term, although borrowers often default on payment and renew their loan at least once. Lenders stand by the design and have stated payday loans are not meant to be “long term solutions.”

While the financial danger of extending involvement with a payday or auto title loan is evident (to borrowers and lenders), a repeat borrower is beneficial for the lender. Plainly put, lenders profit when a borrower continues making payments without paying the loan back in full. A former Cash ’n Go store manager, Steve Winslow, reflects on his training and how it emphasized that, “Your repeat customer is your lifeblood” (Brook, 2009).

In an article titled, “Usury Country, Welcome to the Birthplace of Payday Lending,” Daniel Brook interviewed people currently and previously involved with payday loans in Tennessee. The payday and auto title loan industry members will defend their practices by expressing how further government regulations promote “government paternalism” (Brook, 2009). This hands-off approach is pervasive in the payday and auto title loan industry.

In his article, Brook interviews Check Into Cash company president, Steve Scoggins. When pressed to consider what his borrowers think of their ability to repay a loan, Scoggins responds, “I don’t try to pretend to understand how our customers think” (Brook, 2009).

The realities of payday and auto title loans are clear. Without appropriate resources, a borrower can quickly become indebted and trapped in a cycle of paying essentially meaningless installments. I hope this blog has provided you with useful information and insights. I challenge you to further investigate this issue, and what can be done to promote fair lending in Texas.

Sources:

The payday loan industry. PBS SoCal. Retrieved from http://www.pbssocal.org/blog/the-payday-loan-industry .

Brook, D. (2009). Usury country, welcome to the birthplace of payday loans. Harper’s Magazine. Retrieved from http://www.redditmirror.cc/cache/websites/www.harpers.org_8mvzy/www.harpers.org/archive/2009/04/0082451.html .

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