Search engines, news sites, and press release companies have limited efforts to publicize payday lending sites. Payday Loans are too taboo to touch! Although these actions are designed to protect consumers from predatory lending practices and are well intended, we believe efforts to censure payday lending sites may hinder rather than help the clean up of unscrupulous lending practices in this industry.
We aim to provide informed, fact-based reviews and services to consumers. We believe more reviews and comparison tools help consumers make educated decisions while encouraging a wider array of product choice. Ultimately, we believe consumers, when armed with information and trade-offs, will educate themselves, avoid inferior or deceptive products, and use financial products to their advantage.
Opponents of payday lending believe the best way to protect consumers from high fees and deceptive practices is to ban the product completely. We do not think banning the product is the best solution for consumers. We believe high pricing and deceptive practices are two different problems requiring two different tools. Pricing is best left to market forces. If payday loans are too expensive compared to other options, the industry will disappear on its own. Transparency highlights price differences but, today, it is very difficult to comparison shop in the payday lending space as information is limited or even censored. Deceptive practices are best addressed through regulation. Clear rules and regulations and the active removal of deceptive and illegal lenders creates a level playing field letting consumers trust the system. Bringing more transparency to regulation not only warns consumers of unscrupulous lenders, but also helps legitimate businesses plan and reduce costs. We believe banning a product is a blunt tool that leaves consumers with less choice. Instead, specific tools should be used to address the problems they are designed to fix: market forces for managing pricing and regulations for leveling playing fields.
Payday loans and other short-term loans are expensive credit products but millions turn to them every year. We support building infrastructure and programs, both public and private, that reduce the need for these expensive products but banning products is unhelpful. For individuals who turn to payday loans because they have exhausted all their options, we should be doing everything we can to provide more options not less. The Payday Hound believes that regulation, enforcement, and transparency will do far more to providing immediate options to consumers than blunt tools such as banning or censorship.
For more information on our views see our article More Transparency in Payday Lending in the American Banker.
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