Consumers deserve option of payday lending
The State
April 21, 2009
by: Jamie Fulmer
As a leading newspaper based in the state capital, The State holds a unique position in South Carolina to influence public policy issues such as the budget, public education and taxes.
On the subject of payday lending, though, the newspaper has crossed the line into unabashed lobbying. The State’s editorial board clearly and unrelentingly advocates for severe restrictions or even a ban of the cash advance product in our state and has vociferously declared that position in about 50 editorials and columns during the past two years. (The newspaper has published roughly the same number of news articles during the same period, which also strikes me as excessive.) Recent editorials calling for a ban on payday advances have also questioned the industry’s lobbying and political contributions and insinuated that they are a means to persuade policy.
This is a contradictory scenario, because while The State and its columnists are not cajoling legislators in the halls of the State House, they are certainly using the editorial page as a vehicle to push a specific agenda. In fact, if our company tried to counter The State inch-for-inch, we would have had to spend nearly $500,000 in the past two years.
This sum is based on the estimated rate for placing advocacy advertisements in The State to promote a particular point of view — in this case, the abolishment of a regulated and valued credit service. Indeed, the newspaper urged our company, Advance America, to place such advertisements last year; a letter to our company from an advertising representative at the newspaper said the ads could “reinforce (our) stance on responsible lending practices as well as educate those whose understanding may have been distorted.”
To promote its position, The State continuously dismisses the value of the cash advance product for families. Tens of thousands of consumers in our state — middle-class folks, mind you, who help drive our struggling economy — turn to short-term lenders each year to help with unforeseen expenses and to manage financial difficulties. The vast majority of consumers who choose our service say they appreciate it — and they use it responsibly. More than 90 percent of our customers repay their loans on time and say they are satisfied with the product.
Especially now, in a time of severe economic trouble, hardworking people need access to short-term credit options, including cash advances. For some consumers, a cash advance is their only financial option. At other times, it is the least expensive option — particularly compared to the costs of bank fees and the revolving debt of credit cards, for example. A payday advance involves a one-time fixed fee of $15 per $100 borrowed.
In addition to the previous findings of staff studies from the Federal Reserve Bank of New York, which concluded that cash advances can benefit consumers, several recent academic studies support access to short-term credit. A Clemson University study found that restrictions on cash advances can increase the “costs of doing business which will lead to higher prices than otherwise, leaving consumers worse off.” And an Urban Institute study found that most working families need access to small loans to help them weather emergencies and develop assets.
People deserve the freedom to consider their alternatives and to choose a payday advance because it best suits their needs. At Advance America, we are proud of the reliable and transparent service we offer. Our company strongly believes in ethical business practices and supports every effort to protect consumers from unscrupulous lenders. Moreover, our company strives to be part of the fabric of the dozens of communities where we are located in South Carolina, giving back to our customers and employees by supporting causes that are important to them.
The cash advance industry employs about 3,000 people in our state, contributing significantly to the overall economy. In fact, if our industry were pushed out of South Carolina, and these jobs were lost, the state would be forced to pay about $20 million in unemployment benefits. The State’s attacks on the short-term loan business are pervasive and excessive.
The newspaper has twisted the reality of the cash advance service to fit its desired ideological narrative, dedicating substantial resources to lobbying for the demise of an entire industry. Unfortunately, such an outcome would adversely affect thousands of good, responsible people who have the right to consider more — not fewer — financial choices.
Mr. Fulmer is the director of public affairs for Advance America, which is based in Spartanburg.
