As report by the Rome-News Tribune
GEORGIA’S lawmakers have a tendency to want to ban things. Faced with a situation obviously in need of repair, they often prefer to outlaw it entirely rather than take whatever steps and effort are required to fix it.
That’s what happened back in 2004 when Georgia became the only state to ban what are known as “payday lenders” that give small loans of the sort banks won’t bother with to anyone who is caught short but has a job, a paycheck and a bank account.
Without question there were some fly-by-night operators in this enterprise who charged exorbitant interest rates, penalties and otherwise put their customers into a deeper hole than they ever were to start with. But it never was the business itself that was “bad” but rather the fact the state didn’t regulate or police it. The need, after all, was there and still is there.
The folks who generally need this sort of quick cash are generally those who live from paycheck to paycheck and barely are making it. The least little thing — a needed car repair, a big utility bill due to a severe cold snap — puts them into a bind that their banks won’t even consider helping with. That such situations themselves need to be remedied — with more individual education, better jobs, more pay, better family budget management — goes without saying. But that’s a bigger and larger problem as well as an entirely different one.
THIS NEWSPAPER opposed the ban on these payday lenders back in 2004 and continues to oppose it now. Bans on anything — be it alcohol or sex or loans — don’t work and never have. The state appears to not yet have figured out that all laws are like traffic ones: If nobody enforces them, nobody obeys them.
The General Assembly is now having second thoughts and considering opening the payday-lender door, although with tougher standards and a promise of regulation. Which, by the way, is what the legitimate lending institutions were asking for and supporting back in 2004 as they don’t like the shady operators who give them a bad name either.
It only takes a quick glance around to see that banning payday lenders has only boosted business for those in somewhat related fields. For example, in the past two years it seems as though a “title loan” office has opened on almost every block in Greater Rome. They pretty much offer the same service, except with a car title backing the loan instead of the next paycheck. The state ban on their rivals obviously gave them an enhanced business opportunity, as it did to the myriad small finance companies that make loans and probably pawn shops, too.
The Associated Press recently reported that in nearby states, all of which still have legal payday lenders, customers from Georgia are pouring in from within a 50-75-mile driving range. On the Internet, similar “quickie loan” places are outside of Georgia’s control.
THE CURRENT proposal, House Bill 163, appears structured in such a way that only legitimate businesses will be interested in returning to the state. There’s no “interest,” for example, but rather only a “service fee” capped at $15 per $100 borrowed in a “cash advance” for two weeks. Customers also won’t be able to borrow more than 25 percent of their monthly income. The borrower would have up to four months to repay and the original loan could not be “rolled over.”
More importantly — and this assumes the state will do what it didn’t do before and enforce the provision — lenders who break the law would be fined $1,000 each day for each violation.
Assuming someone will actually wind up watching the store with some vigilance, this is much more along the lines of what should have been done originally to end abuses rather than the outright ban that Georgia imposed.
To be sure, this entire line of endeavor is less than admirable. Although it fills a need, it also profits from people who have encountered hard times. On the other hand, without such an escape valve those bad times can, and often do, become even worse and, in that sense, payday loans can actually be viewed as making things better.
THAT IS NOT so much an endorsement as an observation.
But the plain of it, just in driving down the street and seeing all the storefronts that already specialize in making money off of people with existing money problems, is that bans on such lenders don’t work. It is far better for all concerned to have them on the playing field although with a very detailed rulebook and lots of umpires watching.
The real wish of the general public, and of various consumer groups indignant at the very notion of these lenders returning to the one place in the United States they don’t already operate, is that legislators (and Congress) would start paying attention to the real, unaddressed problem of the underlying, and often self-perpetuating, conditions that lead to either being poor or “barely making it.”
That’s the only way to “ban” this
