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Letter: Payday Loans are Bad

Steven V. Martino writes that payday lending is "legalized loan sharking."

Rather than devise some catchy hook for the opening of my letter, I've decided to just say it how it is: Payday lending is bad. 

Now, let me explain. Payday lenders set up shop in some of our state's poorest communities. We see them in Pawtucket, Woonsocket, Providence, Cranston and even Warren. They attract folks who have no money, no savings and, often times, little-to-no credit. Financially strapped customers borrow an amount they must pay back in two to four weeks, and then they borrow and re-borrow that same amount for years. That is how this ridiculous industry makes millions off the backs of decent, hard working Rhode Islanders.

Payday lenders also claim they provide a valuable credit option to folks who, otherwise, would have no access to credit. But the truth is, Rhode Islanders would be better off without it. In fact, these "loans" aren't even real loans. Simply put, payday lending is nothing more than legalized loan sharking.

Payday lenders also go to great lengths to restrict repayment plan options, which can help break the payday loan debt cycle consumers so often find themselves in. And, they even claim they're bogus product is better than other unfriendly credit options, like bank overdrafts and late fees.

So, to recap...payday loans are bad.

- Steven V. Martino

jbm January 30, 2013 at 06:27 PM
Steven - The word "loan shark" elicits the thought of physical harm - actual "leg breaking" for non-paying customers. It doesn't elicit a regulated financial service provider, with state and federal regulators monitoring activity and prosecuting misbehavior. Don't you think that is a really critical difference Steven? I would if I needed cash - I'd rather go to the regulated entity. The cost may seem high, but as anyone who has bounced a check or had their utilities turned off, does in fact understand, those costs are higher. It's $35 if you bounce a $10 check. It's over $100, plus unpaid costs, if you have your electricity shut-off, and need it turned back on. Finally, you say that residents would be "better off without it," as if waiving a wand or passing a law actually makes short-term small dollar loans disappear. Passing a state law doesn't do that. Look at this article from the Federal Reserve Board regarding How Households Fare after Payday Credit Bans: http://www.newyorkfed.org/research/staff_reports/sr309.html . I think it's better if the state regulates and monitors short term loans, and encourages competition, instead of legislating consumers into the hands of unregulated offshore Internet lenders.
Leanne magilll January 30, 2013 at 06:39 PM
Isn't it bad ethics to take advantage of people who find it difficult to manage their finances?
stephen v. martino January 30, 2013 at 06:47 PM
Wow, it looks like the industry is really putting their dollars to hard work this year. You guys wasted no time replying with your predatory lending spew. Expect more letters.
Raul Jamieson Miguel January 30, 2013 at 06:52 PM
Predatory Lending? Seriously? What do you suggest someone who needs money to pay bills do without banking or other financial options? Do you suggest that we just let them leave their bills unpaid, get them backed up, and eventually lose their water, electricity, etc., and watch them lose their house, etc.? In a perfect world, no one would need a pay day loan. Unfortunately, the world is far from perfect.
Raul Jamieson Miguel January 30, 2013 at 06:54 PM
Here's an even better idea -- you can't pay your bills? Let the government GIVE OUT MORE FREEEEEEE MONEY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Walter Norton January 30, 2013 at 07:11 PM
Leave the poor alone. Don't lend to them at all; remove any access to credit they might have. The government is carving up low income assistance, and here we are trying to remove any financial recourse they still have. In fact, maybe if we ignore them entirely, they'll just go away.
jbm January 30, 2013 at 07:24 PM
Steven and Leann, it sounds like you are saying: "Don't give those needing money options to avoid high cost utility restart fees, avoid bank overdraft, avoid unregulated off-shore lenders, or real loan sharks (people who hurt borrowers). Get rid of the cheapest, regulated option, payday loans, and throw borrowers to the wolves." If that's what you're saying, you don't really care about consumers, so what is your agenda? Face the facts. Real "loan sharks" exist. They work with sports bookies. They break peoples' legs. They really hurt people. By contrast, payday lenders are highly regulated entities. That's a HUGE and IMPORTANT distinction, and ignoring it shows you care more about some bizarre agenda than you care about consumers or the truth. Acknowledge and refute the truth, or move on. But stop ignoring reality.
Leanne magilll January 30, 2013 at 08:30 PM
Jbm your making it sound like payday lenders are heros! Lol Surely you have a conscience knocking about inside you?
Leanne magilll January 30, 2013 at 08:57 PM
By the way jbm I have a duty of care to my clients. I recognise that the demand is there for short term lending, however the high interest charged is hard to justify and lenders can charge what they want as not regulated in the uk, which is where I reside.
jbm January 30, 2013 at 09:02 PM
Leanne - to millions of Americans who have bounced checks and paid utility restart fees, they are heros. To people who need money for unexpected car repairs or unanticipated costs, and don't want to bounce a check or miss payments on someething else, they are heros. Consumers vote with their wallets, and overwhelimingly like these things on survey after survey. This is a classic situation where a self-proclaimed "know-it-all" who has never been there before, is trying to impose consumer preferences on others. Read the studies. Especially those that aren't coordinated by the industry or self-proclaimed consumer advocates. Read those from government agencies, academia, etc. Leanne - You have to agree that these are better than unregulated loan sharks or unregulated off-shore lenders. Wouldn't you rather that the state and federal regulators constantly monitor these folks, license them, curtail them, then to turn a blind eye. Read the study noted above from the Federal Reserve Board regarding How Households Fare after Payday Credit Bans: http://www.newyorkfed.org/research/staff_reports/sr309.html. It's one thing to not like something, but another to ignore the alternative.
jack Johnson January 30, 2013 at 10:40 PM
In typical fashion when presented with logic or facts regarding payday loans, Steven Marino's reply is: "Oh, you must work for the industry". Notice how Steven does not reply directly to the arguments presented. Like all payday opponents, he has decided on his truth. Instead, he only provides personal attacks. All of this, by the way, is not only a logical ad hominem fallacy, but even if all these people were being "paid by the industry" to spend their days trolling obscure Patch columns that have no influence on public policy, it doesn't automatically invalidate their points any more than Steven's are just automatically correct. In point of fact, these dissenters are correct. Cue, "Oh, you must be another paid shill" from Steven.....now.
Leanne magilll January 30, 2013 at 10:45 PM
The high interest charged by most payday lenders is unjust to the target market. I don't declare to know it all but I can read APRs.
Raul Jamieson Miguel January 30, 2013 at 11:20 PM
The problem is Leanne, what is a fair APR? I mean, is it fair that a bank in theory could charge you a $35 OD on a $.99 pack of gum? But by opting out, you leave yourself open to that... So what is worse? You could buy 10 packs of gum, and have it cost you $360 in theory ... Is that $17 you are paying for roughly $100 of juice anywhere near that? Not even close. However, you know that going in that you are going to pay X depending for what $Y you choose to lend on. This isn't like the old credit card scams where the company would promise you a 9% interest rate, and as soon as you missed a payment juiced the rate to 30%. You know the risks/payments going in. In a perfect world, no one would need access to these sort of products.
jack Johnson January 31, 2013 at 12:52 AM
Hey, maybe Steven is a paid shill for the Center for Responsible Lending. After all, if he can accuse others, let's accuse him!
jack Johnson January 31, 2013 at 03:44 AM
Still waiting for you to provide a rebuttal to all the arguments others have provided. So far its been you calling them clueless and accusing them of working for the industry for which you have no proof -- nor does it matter if the arguments are valid. So, what's it to be Stephen? Meanwhile, please provide statistics that prove your claims. Not gonna happen, is it?
jack Johnson January 31, 2013 at 03:47 AM
Well, Leanne, let's think about this. If you need credit and you take away all forms of short term credit, what does the consumer do? You talk about "conscience". Where is YOUR conscience if somebody needs to bring their child to a doctor but can't afford it, so they need a loan? Where is YOUR conscience when you take away somebody's free choice about what credit they wish to use? You also don't respond directly to the points jbm makes. You and Steven are the same. you don't let facts get in your way.
Joe Richer January 31, 2013 at 12:56 PM
So Stephen, I am always willing to learn. Just where am I mistaken? By the way, calling your opponents clueless is not an argument...never mind that it's not polite.
Joe Richer January 31, 2013 at 01:03 PM
Who is taking advantage here? Two people meet on the street. Person 1: I don;t know you but would you please lend me $100? Person 2: I will, but since this loan will be risky, you'll need to pay back $150 next week. Person 1: That seems high Person 2: Perhaps, but you can always try another lender. Person 1: No one else will loan me the money Person 2: Then you see my point about my risk? Person 1: Indeed, okay I will take the loan Both parties shake hands and smile. Both parties have gotten what they need from the transaction. It's a win win. It's also EXACTLY the same thing that happens when you buy a car or a can of soup. Thanks for posting the question Leanne! I just don;t think there;s an ethical issue here.
Raul Jamieson Miguel January 31, 2013 at 01:32 PM
Yep ... Still waiting on that Stevie Wonder ... How about some facts, not opinions..
Lawrence Meyers January 31, 2013 at 03:24 PM
And so we have it. Stephen V. Marino resorts to scatology to defend his position. When he goes that far out, you know he's lost the debate. Fortunately, he has now been owned. By me. http://cranston.patch.com/articles/letter-payday-loans-are-good
jack johnson January 31, 2013 at 04:04 PM
Stephen V. Martino has a lot of nerve. He sits there and criticizes payday lenders when he works a debt collection agency!
jbm January 31, 2013 at 07:15 PM
Leanne - If cost is your concern, consider that almost everything in small packages costs more on a quantity basis. There is a base level cost to take something to market, regardless of its size. Consider the fact that a bottle of soda from a vending machine costs almost as much cash as a two liters from the grocery store. Why? The cost to get to market is probably close to the same. Loan documents, employees, storefronts have a cost, whether you're offering $100 loans or $200,000 loans. There is just a base line cost, that can't be reduced just because the loan amount is smaller. It's a fact in any economics. On a mile by mile basis, taxi cabs cost considerably more than bus rides (further distance, cheaper per mile), which cost considerably more than train rides (further distance, cheaper per mile). This is the wholesale/bulk/economy of scale concept of economics. Buy anything in a small package at a convenience store / gas station, than compare the unit price to the same item from a wholesaler. You save money on a unit by unit basis if you take more of the product, and are willing to take the time to shop. Same with consumer credit. On a unit by unit basis, the APR is higher on the smaller / convenient payday loan, than it is on a mortgage. The mortgage has many of the same costs to the lender, but they give a lot more cash, and take a lot more time to give it to you. So, why hate on payday, any more than the local convenience mart, or coke bottle?
jack Johnson January 31, 2013 at 10:46 PM
"imagine my hairy ass mooning you" Yes, you are. Nor have you been able to respond to any points made here or on the opposing editorial. You are nothing more than a troll seeking attention. And from the look of your Facebook page, you live in your mother's attic.
jack Johnson February 03, 2013 at 07:29 PM
Nobody will mistake you for human. Especially since you cannot provide any kind of intelligent, fact-based reply to the issue you have been schooled on.
stephen v. martino February 04, 2013 at 06:32 AM
Turns out Lawrence and "Jack" are out-of-state payday loan insiders, with no interest in what's going on here, aside from the paycheck they earn from their predatory puppet masters. "Mr. Johnson's" real name is Jackson Strain and he can be reached at the Fairness to Payday Lenders Society, and his email is bizmaven9@gmail.com. And, Mr. Meyers has been a payday insider for years...his articles have appeared in numerous states where payday lending has been banned. You've both been dismissed. Scram!!!
Joe Richer February 04, 2013 at 01:33 PM
This note could have not effect on my arguments. We live in a nation of free men and women. So long as there is no taint of force, fraud, or monopoly I would not stand between a willing buyer and a willing seller. These lenders force no one to borrow from them. You've presented no evidence that they lie about their terms (fraud), and I see banks and lending institutions everywhere (monopoly). So just what is the problem? Are you going to tell everyone who I really am next in order to refute logical arguments? I would ask everyone to argue with more decorum and civility.,,and facts.
jack Johnson February 04, 2013 at 06:51 PM
Joe is quite right. And the last thing he needs to do is learn from you -- a person who consistently relies on ad hominem arguments rather than address factos, and sends me emails loaded with profanity. All anyone needs to do is read: http://cranston.patch.com/articles/letter-payday-loans-are-good
Benjamin John Coleman February 04, 2013 at 10:37 PM
10 Dirty Secrets of Payday Lending: http://www.ripayday.org/?p=191
stephen v. martino February 05, 2013 at 02:24 AM
http://www.ripayday.org/?p=31 View and sign the petition for payday lending reform in RI, by clicking the link above.
jack Johnson February 10, 2013 at 05:21 PM
Martino deleted his scatological rants. I guess he's trying to scrub his history so the legislators will take a debt collector "seriously". Fortunately, I have the screenshots and his equally unhinged emails.

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