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Sometimes, There Really Is Only One Side of a Story

Today’s front-page Wall Street Journal story on payday lenders hitting up the elderly and disabled for high-rate loans lends another blow to the industry’s attempt to clean up its image. The only worse publicity payday lenders could ask for is a followup tomorrow on making loans to the blind and infirm.

But sometimes there’s no way to put a gloss on what things really are. And payday loans aren’t a needed financial service; they’re a ridiculously high-rate product aimed at desperate people.

The industry denies this, and with an attack-dog public relations firm goes after its critics. The only people who oppose payday lenders, they argue, are consumer groups and elitists, who don’t understand how hard it is for ordinary folks to find a small loan when their car breaks down or they can’t pay a bill.

Fair enough. But it’s also been proven, time and time again, that these ordinary folks don’t go to the payday lenders for a one-time problem, and then move on. Nearly all payday users are repeat customers, often paying 400 percent interest or more on loans that they roll over again and again, piling up more in fees and interest charges each time.

If you ignore the industry rhetoric and talk to people who use the lenders, they always tell you they never intended to keep coming back for more loans. They ran short one time, and when they were due to pay back the loan two weeks later, they owed so much in fees it made sense to take out another loan. And another. And another. And then they were stuck.

Payday lenders fight any attempts to regulate them, and say they’ll go out of business if they’re forced to charge 36 percent interest on loans, as most other small lenders must do.

Here’s what I don’t understand: If someone can come up with an idea to create microloans to provide credit in the developing world, why can’t we figure out how to offer small consumer loans at less than loan shark rates? Where are all those the Wall Street financial wizards and Silicon Valley entrepreneurs when you really need them?

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