Throughout the United States, state governments are taking notice of online payday loans. For a few years, the automatic response of many state legislators has been to vilify and outlaw online payday loans. However, with the recent move by the payday loan industry to publicly address many of the issues that had been considered objectionable by consumer groups, state governments are beginning to change their simplistic approach to online payday loans. This current reassessment of the payday industry has also been brought about by a recent objective study that has demonstrated the questionable nature of many of the complaints regarding online payday loans.
It is easy to say that online payday loans are a poor financial choice. Of course, most people would not argue that to borrow money is not as good a financial move as earning or investing it. However, not everyone is in the position to invest the money that they earn. Some individuals are earning just enough to pay for their bills, housing and food. For such people, if they have made a past financial error, one that has put a blot on their credit, the door to the loan help found in traditional banking is often closed. In such a case, online payday loans are a means of procuring funds for unexpected expenses.
It is just as simple to call online payday loans predatory, suggesting that they are preying on certain socio-economic groups. The problem with this is that such an approach indicates that there must be a socio-economic group that is incapable of understanding financial issues, or even how to asses their own financial situation. Aside from being condescending and rather insulting, it is also a questionable premise at best, and simply wrong at worst.
Those who borrow from online payday loan companies are largely financially responsible and organized. This is not a loose statement of conjecture, but a finding by Donald P. Morgan, of the Federal Reserve Bank of New York, in a recent study he authored and released. His findings are based on his research into the payday loan industry and the economic equations he used on the people who actually utilize online payday loans.
These findings included such insights as the fact that online payday loans were not only not found to be detrimental to the social welfare of the majority of recipients, but did, in fact, raise the overall social welfare of the clients. The social benefits of this are not confined to the borrowers themselves, but actually extend to the greater social network and to the government itself. This is accomplished through the fact that those who utilized online payday loans were able to solve their own financial issues, rather than needing to turn to social and governmental welfare programs. In addition to this economic welfare savings, payday loan companies generate employment, as well as generating tax revenue from socio-economic groups that had been abandoned by traditional banking institutions.
Online payday loans are hardly an altruistic means to economic stability and independence for lower economic groups. However, as states are beginning to realize, they do serve a social purpose and can be a viable means of generating revenue for state coffers. For example, the state of Georgia had outlawed online payday loans for years. In the early weeks of 2007, however, they convened the state legislature to debate and vote on the possibility of bring online payday loans back into the state. After listening to the pros and cons, and debating the issue themselves, they opted to allow online payday loans to reenter the state.
New Mexico has just recently passed their own laws covering some of the issues in the charges that are used for financing online payday loans, but have recognized the need to allow them to exist. While the new laws do put some new regulations on them, online payday loans have been seen to serve a viable financial function. In fact, many of the issues that the new legislation is designed to confront are issues that the payday loan industry itself has recognized as needing change and has publicly stated that they are currently implementing many of these changes themselves.
Anyone who has read even a little history will readily agree that a common tact in the world of politics is to seek out and attack straw men. In other words, politicians like to seek out and find easy targets to attack, in the hope that it will make the particular politician appear to be a mover and shaker. However, time will often demonstrate that if something is providing genuine help to people, what was once erroneously viewed as a villain can sometimes be seen as the productive, financial-social contributor that it is. In the case of online payday loans, the sheer numbers of clients nationwide, and growth of the industry is proving in a real and substantive manner that online payday loans are serving a purpose to the communities that they serve. As studies have found, if they did not do what they claim to do, no one would be using them.
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