Say you have crappy credit, you live paycheck to paycheck with wages that have stagnated for years, and just as an example - you have put off paying your expensive Virginia Power bill.  They shut off the power.
You have no credit card, no one to call and you need your power turned on prior to your next paycheck.  For someone like that - being able to get a payday lender to loan you the money is a godsend - and nothing less.

I just think it's an issue that has grey areas - and many who bring up legislation like this have no idea what it's really like to live with next to nothing.  

The House bill moves, if imperfectly, toward finding a solution to this very problem -- helping the folks who need that kind of temporary assistance without the cost of trapping ten times that number of people in a spiral of never-ending debt.

I do not live with next to nothing, and I can only imagine the kind of desperation a person might feel having to choose between keeping the power on and feeding your kids. So I understand the appeal of these types of lenders.

At the same time, I am nauseated by the fact that these lenders make money off of the very  kind of desperation they claim they alleviate by charging obscene rates of interest.

Personally, I think a rate cap of 36% is high enough for a lender to make a decent ROI in this business, but if it isn't, then they are free to crunch the numbers. But by the same token, the idea that rates of 350% and higher are required is absurd, and the lenders' actions in this regard give away the true nature of their game: soak the powerless and the poor for whatever they have left, because no one gives a crap about them anyway (I don't mean to suggest that you are saying this).

Obviously, more is needed than just legislation the rein these predators in. Financial education is needed, as is alternative sources of reasonably priced credit. but the first step is to break the cycle of debt and dependence in which these loans trap people.  

Take away the only source of loans for people with bad credit by passing the House bill and risky borrowers will go to illegal loan sharks or pawn shops, neither which have any "cap" on interest rates.

Or they will bounce checks and the banks will charge them $35 per check even for a $2 check or a 50 cents overdraft.  (What is the rate for this usery?)

If you really want to be fair, any bill that affects the payday lenders should also address outrageous bank overdraft fees, car title loans, and pawn shops.  A bill should also put caps on auto loans and mortgages.

Those who want to do away with payday lenders says credit unions and churches can fill the need for those with bad credit.  This is a joke.  

Credit unions only lend to members, it can take days to process a loan, and they shy away from risky borrowers, members or not.  As for churches, they are not equipped to lend money (unless parishoners want to see their weekly donations to the collection plates used to fund risky loans that often will not be paid back).

All the House bill will do is make it harder for those in need to borrow quick cash up to $500.  So they will sit at home with no money AND no electricity or heat or automobile.

Is the House bill really a progressive position when it will actually hurt, rather than help, thousands of less fortunate Virginians?

There are several issues at play, and the predatory lending industry conflates them.

I agree that these payday loans help a small percentage of people who need emergency cash, but at the cost of trapping many more in a never-ending cycle of debt. That is simply undeniable, and has been documented over and over again. If for whatever reason you dispute this obvious truth, then it is pointless to debate the issue. If you refuse to see the problem, then of course you would not agree with the solution.

If, however, you agree this is a problem, then fixing this problem is a prerequisite to attacking the problem of the working poor in Virginia and, more generally, the U.S. In the long run, charging people interest rates they can never afford to repay helps no one except the payday lender.

Also, lets not kid ourselves that these transactions are anything but predatory in nature. The relative bargaining power of the parties is about as unequal as it gets, and in many, but perhaps not all, cases the relative financial knowledge and sophistication of each party is grossly unequal as well.

This argument of, "Hi, I'm a payday lender, and I'm just here to help," is a smokescreen for the real game, which is to soak the desperate, working poor.  

What is the solution other than killing the payday lending industry?

Where does that leave people who have no other lending option?

What institutions will fill in the gaps?  

Certainly not banks.  They don't want credit risks and don't lend amounts as small as $500, anyway.

Give me the names of credit unions and churches that will make more than 40,000 loans of $500 or less to borrowers who are clear credit risks.  I don't think they exist.

Show me where these poor-credit people can turn if there are no payday lenders?

I don't suggest that the payday lenders are saints. They are not, but neither are bankers.  

The bottom line is: Why kill the only source of funds for many Virginians in need without providing them with a more palatable alternative?

The House bill provides no alternative.

Just catching up on my reading.

From yesterday's Wash Post:

The chairman of a Senate committee looking at bills to reform the payday-lending industry threatened yesterday to effectively kill the legislation for the year unless both sides can work out an agreement.

Majority Leader Richard L. Saslaw (D-Fairfax), chairman of the Senate Commerce and Labor Committee, said he would refuse to appoint conferees to work out issues between the Senate and House proposals if a compromise can't be reached behind the scenes.

Last year, Saslaw pulled his industry-written bill in the final hours of the session for fear that Gov. Timothy M. Kaine (D) would put stricter regulations on payday lenders if the bill got to his desk.

The industry favors the Senate version; opponents of payday lending favor the House's bill. The session is scheduled to adjourn March 8.

Link:

http://www.washingtonpost.com/...