This week ABC News posted a troubling story about a retired Marine who was locked into a payday loan cycle of debt. Reportedly, he spent 5 years repaying $50,000 for $2500 worth of loans.
Legit? Possibly, but not for sure. The actual story may be different from the news story.
Opponents of payday lending have spent years telling horror stories in an attempt to have the loans banned from the American marketplace. More often than not, these attempts are backed and funded by mainstream lenders who simply don ‘t like the competition these small dollar lenders provide.
The word is called Propaganda, and it means to use biased information to promote your cause or political beliefs. The point of this news story is to show whatever facts will be most likely to make the reader dislike payday loans. The goal is to turn public sentiment against these lenders, and thus make it easier to put the entire industry out of business.
This is a short-sighted approach to lending reform. After all, millions of people use payday loans every year because banks won’t help them. If the industry goes away, those millions of people will STILL need financial help. Only now they won’t have anyone to turn to.
Behind the Story
Let’s assume that all the facts and figures in this news story are accurate. They may not be, but for the sake of this blog let’s assume they are correct.
Mr. Clark took out 5 payday loans concurrently. No matter what your financial situation, this is an incredibly risky thing to do. Since this occurred, laws and regulations have been put in place to prevent people who taking out multiple payday loans at once. Some states also require a waiting period between one loan and the next.
Mr. Clarke borrowed $2500 in loans specifically designed to be repaid from his next paycheck. That is the nature of these loans: to be small dollar and short term. He signed multiple loan contracts agreeing to repayment terms he could not have possibly afforded. If he had been tricked by one shady lender, that would be one thing – but he signed documentation with 5 different lenders. Did he intentionally ignore the financial terms he was agreeing to?
The Final Analysis
This blog is not an attack on Mr. Clark, nor does it insinuate he did anything wrong.
The point of all this is simply to demonstrate that this particular news story is slanted, and is only telling you one person’s perspective of the story. The added fact that the story comes from an anti-payday loans activist also should make a difference in the final analysis.
What is the real story going on here? From one perspective, the story is “one man got in over his head, so we should change the laws so it never happens to anyone else.” But from another perspective, it becomes “one man made a poor financial decision, and so we should take away everyone else’s right to make their own decision.”
But that doesn’t make for an attention-grabbing propaganda headline.