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Guest MINDSETTER™ Jamie Fulmer: Payday Lenders Bridge the Gap in the Credit Market

Monday, November 12, 2012


A recent article presented an inaccurate portrayal of payday advances and the important role they play in the lives of many hardworking, middle-income Rhode Island families.

As the authors note, Americans are currently facing an enormous uphill battle and use a combination of financial tools to manage periodic financial challenges. These tools include personal loans from a bank or credit union, or even a nonprofit organization; the sale of jewelry, precious metals or collectibles; short-term use of a credit card; or a cash advance from a regulated short-term credit provider like my company, Advance America. When confronting a need for urgent credit, consumers carefully weigh the costs and risks associated with these options.

Consumers benefit from having such a wide variety of competitive credit solutions. But strict credit and membership requirements and long approval times exclude bank and credit union options for a significant number of consumers. And while short-term lenders welcome competition, including from organizations like the Capitol Good Fund and West Elmwood Housing Development Corporation, these nonprofits serve a limited number of consumers, making them inadequate substitutes for retail lending.

Short-term lenders such as Advance America bridge the gap in the credit market, providing consumers with critical access to credit when other financial institutions do not fully serve them. A payday advance from Advance America, with its fixed, one-time fee of $10 per $100 borrowed in Rhode Island, serves as an affordable tool for overcoming financial difficulties, especially when compared with more expensive options such as overdraft fees, unregulated Internet loans or missing a bill payment.

Though any form of credit can be abused or misused, our experience shows that most customers use payday advances responsibly. We work with all customers to help them be successful borrowers, including those unable to repay by their due date, and offer an Extended Payment Plan at no additional charge. Our customer satisfaction and repayment rates are both above 90 percent, indicating that our customers understand and appreciate our service – for them, it makes personal and economic sense.

Providing a diverse array of credit options is an essential part of creating economic empowerment. Payday advances and other short-term financial services play an important role in ensuring all Americans have access to cost-effective, reliable and transparent credit when they need it.

Jamie Fulmer is the Senior Vice President of Public Affairs for Advance America, Cash Advance Centers, Inc.


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Samuel Bell

The business model for payday lending is to charge vulnerable Americans in tough situations utterly preposterous interest rates--typically in excess of 100%. The bill Advance America recently killed by hiring the former Speaker of the House as a lobbyist would have merely capped such interest rates at 36%, a number that is still mind-bogglingly high, especially when compared to the interest my bank pays me.

These absurd loans are often simply unpayable, and they trap those already down in a vicious cycle of debt that is wrecking families all across America.

Payday lending is predatory lending in one of its vilest forms. I frankly find it stupefying that we got through a cataclysmic economic meltdown caused largely by predatory lending with predatory lending still perfectly legal. Let's fix this, Rhode Island.

Russ Hryzan

The explanation Mr. Bell gave above is absolutely not the same type of lending that caused the near-collapse of our financial system. The types of loans that trap consumers into loans they can't pay are loans with compounding interest rates so high you never get to paying down the principal, and then the value of the properties collapsed on top of it.

Payday lending of a few hundred dollars is a debt burden without compounding interest and because of that, it's not a type of lending that can't be easily gotten out from under.

As a person who recently had to get private short-term financing to complete a construction project because Dodd-Frank placed so many rules and regulations on the banks that they're unwilling to lend, I can attest to the value and need of private short-term lending. Nobody is holding a gun to your head and forcing you to borrow money in any case, but the lack of compounding interest on payday loans makes them high-interest, but hardly predatory.

Samuel Bell

Payday loans are predatory because the interest rates are astronomically higher than the market rate. There's really no way you can fudge the numbers to avoid that fact.

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