Borrowers have rights. They have the right to know how much their loan is going to cost them. They have the right to return the money they borrowed by the end of the day if they decide they changed their minds. They have the right to know about dispute resolution. The funny thing is they have the right to know so much, that most payday loan places will hand you a couple pages of fine print on your rights and have you sign something at the bottom saying you waive your right to a jury trial and you do so knowingly.
Despite the volumes of information payday loan places provide, people find themselves going to payday loan places and signing on the dotted lines anyway. It makes one wonder whether knowing is enough. How can one know and yet decide on something that has been compared to usury? Is it ignorance, indifference, or something else altogether that keeps the industry in consumers at such a rate that the business seems to be flourishing while other businesses are floundering?
To say the issue raises questions is an understatement. It's tough to have sympathy for an industry that seems to have flourished while the country is going through one of the toughest financial crises in recent memory. The payday loan industry has definitely profited, having become in fact, "$28 billion industry nationally, according to the Center for Responsible Lending" (Associated Press, 2007). As the industry grows, it leaves us wondering how people would willingly pay 480 percent. Ray Fisman, in The Dismal Science, asks the question "Do people take out payday loans because they're desperate, or because they don't understand the terms?" What Fisman almost asks but doesn't is are people stupid or don't they know that one $500 loan from these establishments potentially costs them $2692 a year? These seem to be the same individuals who then blog questions like, "Is my payday loan place going to have me arrested? Are these businesses preying then on the stupid?
Yet, no one is forcing them to go. Or are they? It has been suggested that our current economic crisis has made it nearly impossible for the average person to get a loan in any other fashion. In response to the push for more stringent borrowing practicing, traditional banks are turning away traditional borrowers. Perhaps it is not a coincidental link between the push by banks to be stricter and the responsiveness of the fringe industry to grow as a result. Payday loan lenders aren't stupid. Like every belligerent child, they know there is a limit to how far you can push until you get, proverbially, smacked in the head.
President Obama has made a point of stating that America, to be economically strong, needs to be able to have credit. If this is the case, we are looking at a new wave of Americans who have been forced out of the credit game, disenfranchised by a banking industry that was irresponsible enough to loan to irresponsible consumers forcing mainstream America to choose an even stupider path.