The recent furor over payday loans makes one wonder: If they are so awful and take advantage of low income families, why do people use them? More to the point, why are so many people avoiding banks like the plague? Best estimates indicate that more than 18 million Americans have no bank account whatsoever with a total of 60 million people ‘under-banked’ which means they rarely if ever use their existing account. It is not uncommon for under-banked people to use the services of payday lenders. But if banks are the champion of all that is great in the financial world, why are an increasing number of people steering clear of them?
Perhaps because banks are as bad as any ‘predatory’ lender. Short-term cash loan companies are often depicted in the same way as one would describe a loan shark. The fact that companies of this nature are heavily regulated by their resident states and potentially the Federal government seems to slip beneath the notice of most anti-emergency cash loan protesters. They cling steadfastly to the outdated notion that instant cash loan organizations charge too much interest, deliberately do so to gain even higher rollover fees and hide their true intentions. In actual fact, payday lending is one of the most transparent financial services there is. Companies are required by law to spell out their terms and conditions.
Banks on the other hand, like to make things nice and complicated. For instance, banks in America like to slap an average fine of $36 on an account that is overdrawn for one day. This is far more restrictive than the payday loan companies that charge the highest level of interest. Those who use check-cashing services and use money orders to pay bills could be hit with fees of over $700 a year. Banks desperately try and justify their conduct but they can’t really expect the public to swallow such fees and charges for the privilege of placing their money into a bank account. And we won’t go into the laughable difference between the interest offered on savings accounts and what they charge for a loan. Nor will we talk about the almost criminal difference between what they buy and sell foreign currencies for (a difference of up to 11% in many instances).
The Customer Is Always Wrong!
There is a lot of negative publicity surrounding payday loan companies but at least they won’t have you arrested if you choose not to use their services unlike a Citibank branch in New York. Yes, this actually happened in October 2011 when a host of customers gathered to close their accounts at the same time. They launched a peaceful protest against the bank and were promptly arrested. None of the protestors used physical force or even foul and abusive language. Nonetheless, 23 of them were arrested.
So, the next time someone asks you why you’re one of the 60 million under-banked Americans or why you like to use the services of an instant cash loan company, explain to them that payday lenders are more honest than their bank counterparts and won’t have you arrested if you annoy them. Cash loan companies are not the problem, the arrogant ‘holier than thou’ attitude of the banks is.