Dennis Shaul: There Are Responsible Payday Lenders Out There

By Dennis Shaul, chief executive officer of the Community Financial Services Association of America

September 16, 2013

American Banker

The much-maligned payday lending industry is not what you may have been led to believe. Unfortunately, what many in the media won't recognize, and what too many regulators may also overlook, is the distinct difference between responsible lenders who offer a safe, reliable loan product, and unscrupulous lenders who commit fraudulent acts and scam consumers.

A payday loan itself is a viable credit product that plays an important role in helping those who experience cash shortfalls cover immediate expenses. But unscrupulous lenders who deceive borrowers and uphold unlawful business practices have given the entire industry a black eye. Because of this, licensed, regulated lenders are often criticized, forced to defend their product and those who choose to use it.

You may be surprised to learn that more than 40% of households in the U.S. have used some form of alternative financial services, and these services can vary from payday and installment loans to check cashing and money transfers. Importantly, these products help millions of Americans meet their financial needs – whether because they lack access to traditional banking services or simply to address a short-term financial hardship. Whatever the reason, "alternative" financial services are becoming increasingly mainstream.

Those who work in relatively well-paid professions can celebrate having several credit options, but many consumers can't obtain traditional forms of credit and are unable to rely on credit cards for unexpected medical bills or when their cars need repair. Providing a variety of alternatives is necessary so that we can support the credit needs of all consumers. If we empower consumers to make informed decisions about the financial products they want and need, they can – and will – do the math and pick the option that is best for their specific situation.

My organization, the Community Financial Services Association, represents storefront payday lenders. We have been at the forefront of research into consumer use of payday loans, and our members have decades of data that attests to the value of these loans and their borrowers' positive experiences.

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