Comments on: US Moving to Ban Microcredit

By: Brenda van Niekerk

Brenda van Niekerk — Fri, 19 Feb 2010 10:32:35 +0000

The fact that payday loans are constantly under fire makes one realize that loan companies should be scrutinized and more legislation laid down to protect borrowers who do not realize how high the interest rate is and how easy it will be to fall into debt

By: Charlie

Charlie — Fri, 20 Nov 2009 14:05:52 +0000

Interesting what it will result in. Let’s see.
Maybe we ban all kind of credits? Do you think it will solve the problem?

By: Marcin Tustin

Marcin Tustin — Tue, 15 May 2007 10:10:43 +0000

I wonder: would there be lender or borrower interest in relatively low value secured revolving credit facilities: e.g. $300 secured on a car?

By: NOTGIVEN

NOTGIVEN — Mon, 14 May 2007 02:27:09 +0000

I have served as a branch manager for one of the leading providers of Payday Advances for the past 10 months.

There are many opponents and proponents to my industry, who all have justified reasons for their positions. My position is that Payday advances do serve a need to a public that desperately searches for alternative lending options.

The fact remains that a one-time payday advance is less costly than current alternatives. For example; a typical Alabama family who lives paycheck to paycheck, may come up short on groceries between paydays. This family may write a $100.00 check for groceries, even though they do not have the money in their account. This family knows that they have overdraft protection on their checking account, which will cost this family at least $30.00 in NSF fees, depending on which bank they use. This family would benefit from a payday loan because the fee for a $100.00 loan is only $17.50.

The problem that exists and I am using my own store as an example, is that over 95% of consumers that originally take out a payday loan, continue to use the service repeatedly. It becomes almost an addiction or a trap that is just too difficult to overcome.

I have a customer that originally took out a $200.00 loan in November of 2003. This customer is paid bi-weekly and has had an active payday loan ever since this date. The total fees paid since during this time, $6353.52. This example represents the vast majority of my current customer base. This is where the problem lies

The company I work for is very good about making the consumer aware that Payday loans are not a long-term solution but rather a short-term fix for unexpected expenses or income gaps between paydays. However, with most family’s living payday to payday, completely paying off a payday loan in a short time period is all but impossible.

To sum it up, it is my firm belief that Payday Loans can be a great service for consumers that run into a problematic situation between paydays. However, I also believe that more strict regulation is necessary.

By: Microcredit and Payday Loans « Conservation Finance

Microcredit and Payday Loans « Conservation Finance — Sat, 28 Oct 2006 13:49:01 +0000

[...] Microcredit loans help smooth out fluctuations in income, maintain consumption levels during lean periods, and provide buffers against sudden emergencies. As such they are extremely useful, but much more like payday loans than venture capital investments. [...]

By: Peter Klein

Peter Klein — Mon, 23 Oct 2006 18:41:16 +0000

Lars, thanks for the reference.

By: Lars Smith

Lars Smith — Mon, 23 Oct 2006 18:35:02 +0000

Thomas Dicter says that “The little serious research we do have on microcredit’s impact shows that it helps poor people bridge cash flow gaps in their consumption cycle, and it can give more confidence to women”. Microcredit is probably a lot more like payday loans than commonly acknowledged.

The reference is here,
http://conservationfinance.wordpress.com/2006/06/26/microcredit-hype-and-hope/