Los Angeles, CA (Vocus) August 4, 2010
According to the Payday Loan Blog, as millions of Americans struggle to tighten down their un-necessary spending during our economic crisis, many are finding that their already limited credit options are currently dwindling. This is due in part to new proposed financial regulations, and also as a consequence of our economic recession. Regardless of the cause, Americans are feeling the crunch on their access to both short-term credit and even small business loans.
Despite these declining credit options, many Americans are still in need of financing and credit options. In fact, many small business owners with good credit are getting turned down for small business loans that would help to make necessary improvements to keep their doors open during the recession. Small businesses aren’t the only ones having a tough time finding financing. Middle to lower class American families which traditionally did not have many credit options are currently finding there already limited credit options are dwindling. Without near perfect credit it is becoming increasingly difficult to get approved for credit cards leaving payday loans as one of their only options for quick cash if needed.
Although payday lending is one of very few consumer credit options left available to these lower-middle income families, many consumer groups and State legislators are pushing to either ban outright or regulate out of existence these payday loan businesses. But those groups and individuals opposing payday lending do not address the issue of the demand for consumer credit options. These opponents generally push simply to eliminate payday loan and cash advance lenders within the State, and do nothing to replace the now un-available source of credit with another financial product that would provide an acceptable credit alternative.
Statistics from these consumer advocate groups, such as the Center for Responsible Lending are often times criticized for being biased and yet again does not address any viable options to replace payday lending. An independent staff report by the Federal Reserve of New York studied the effects of banning payday loans in Georgia and North Carolina. The staff report addresses many of the biases of the CRL’s widely-publicized “statistics” and goes on to make the proper corrections to these numbers. The report summarizes that the “debt-trap” hypothesis is incorrect and that the majority of payday loan customers use their advance loan responsibly in order to avoid more costly overdraft fees or bounced checks. The report also shows that consumers were worse off once payday loans were banned, and they filed more complaints against lenders. It seems that many customers went to online lead generation websites in order to get a loan. These lenders can be un-regulated and will sometimes dodge State laws and regulations as opposed to regulated direct lenders such as Solomon Internet Funding.
It seems that regardless of regulations, the demand for access to consumer credit does not simply disappear. Unless this need is addressed and other options are given to consumers, the demand for responsible and regulated payday lending will continue to exist, especially during our economic crunch.
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