Recent Chicago Tribune coverage of the pay- day loan industry merits a response for clarification.
First, we appreciate the continued recognition by the Tribune that our business serves a legitimate need in the financial services sector. Indeed, hundreds of thousands of short-term loans have been made and responsibly paid back by borrowers. It is not our desire to have consumers roll over loans again and again. Once they do, the odds of ever getting our loan repaid diminish substantially. And we most certainly do want to get repaid. So it clearly makes no sense for us to make loans to people who we believe can’t or won’t repay them.
Second, we agree with the Tribune that something needs to be done to prevent borrowers from getting into too much debt. We have worked with state regulators in the past to address this issue and will continue to do so. Naturally, however, we cannot control the behavior of our customers.
We have also worked to address concerns and achieve workable solutions with legislators and consumer groups. We will continue to do so, even proposing more self-imposed regulation on our industry next year in Springfield.
As most careful observers, including the Tribune, have noted, the payday loan industry fills a need. Until the day comes when banks are willing to make very small, instantaneous, short-term emergency loans of several hundred dollars, we will continue to fill that need. Payday loans are a convenience for which consumers are willing to pay an extra fee. As an annual percentage rate, it appears alarmingly high; but understood as a fee, as it is by our customers, it makes complete sense. At an interest rate of, say, 23 percent, we could only charge 44 cents for a one-week $100 loan. Clearly, nobody could afford to offer such a service, meaning that thousands upon thousands of responsible men and women would be cut out from any credit ever. At 44 cents per $100 loan, you couldn’t even pay the light bill, let alone pay rent, salaries and other overhead associated with a business.
But as competitive lenders, the market will determine what consumers are willing to pay. The market is already doing that job as numerous non-competitive payday lenders have shuttered their doors. Competition has served us well in the past, and I’m sure it will continue to do so in the future.
