More government control isn’t the best solution for the Payday loan problem.
Government controls and regulations have a pretty good record of NOT producing positive results. Legislating these businesses out of business does not remove the need. It only leaves people desperate without help.
One thing that could help solve the lending shark infestation would be to eliminate video lottery. In case you weren’t around to notice, Payday loans, Title loans and Pawn Shops expanded significantly when video lottery casinos opened up on every corner and strip mall. Having made that declaration, I hasten to say I understand the very unlikely prospect of repealing video lottery in South Dakota.
So, what then??
There is a NEED for short term, paycheck to paycheck lending. While I believe video lottery exacerbates the problem, even without gambling there are people who struggle financially and need some kind of assistance.
I would like to see a private sector solution. It might look something like this:
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A higher than bank interest rates would be charged, but significantly lower than current payday loans.
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The borrower gets interest CREDITS for completing financial training and family budgeting classes, along with a selection of other instructional classes. These classes would be sponsored by churches and/or other community non profits.
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The borrower gets interest CREDITS for donations to a “benevolence fund” which would be used to reduce/eliminate interest on loans to some individuals and provide grants to assist others.
That’s the bare bones of a program we were attempting to start at the Community Thrift Store just before we lost our lease and funding. It is a common sense approach that would actually HELP people in need instead of further victimizing them. As it caught on, it could provide a much needed alternative to the loan sharking enterprises of others who prey on these people in need. I believe it could literally force them out of business or compel them to significantly change their lending practices.
Where does the funding come from? There is no shortage of resources. Many people have it tucked away in CD deposits with very low returns. There is plenty of money that could be made available if people of wealth were willing to step up. Cd Deposits and savings currently earn well under 2% (annually). People willing to participate in funding a “Benevolent Lending” program could be a better return on their money or choose to allow their money to be used for rates similar to CD rates as an act of charity. Others would donate funds to help.
Certainly there would be some bugs to work out, but it is a simple approach that provides a solution without more government intervention. I have a personal interest in facilitating this kind of program, but would need some like minded people to help in the effort. Send me a facebook message or email if you would like to help.
Real solutions should come from the private sector.
***Gordon Howie is an author and CEO of Life and Liberty Media***
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All that’s well and good, Gordon. You are to be commended for trying to pioneer a responsible alternative.
But I’ll say two things. First, Tonchia says vote no because it can be done in the legislature. Please tell her you know for sure that has been tried multiple times for many years now by myself and Culter before me, and Glenski before Culter.
Second and more importantly is how you are so like many like you who are so selective in your distaste for government regulation.
By your reasoning in this post the government (given authority by God) should never ban approval on say, a known dangerous and intentionally defective (and evil) medicine that has proven to have destroyed many lives (like that Nazi-created Thalidomide) being pushed and deceptively marketed to the unsuspecting by greedy and unscupulous Pharmaceutical monopolies.
Rather, according to your reasoning, better to hope for the best and let altruist Christian alternatives develop over time. Sucks to be one of those Thalidomide kids.
Vote No on U, and YES on the 36% rate cap.
Btw, the Bible we both consider the highest authority speaks about breaking every unjust contract. And there are Proverbs against those who enrich themselves charging excessive interest to the poor.
I’m praying the confusion you are sowing in the electorate and the confusion the greedy lenders are sowing into the electorate this weekend will be broken over our state by people who are stepping up tomorrow in Sioux Falls to pray strategically. I’m also praying people in our state will have a strong sense this weekend of God’s inclination toward the poor.
Well, I guess you set me straight! 🙂 In my confusion, I’m still voting “NO” on everything!
https://www.mprnews.org/story/2015/04/02/payday-loan-debt
This group in Minneapolis seems to be doing something similar to what you are proposing. If a true study were done regarding the amount of money that gets sucked into payday loans, interest, fees, etc. and is then unavailable for day-to-day spending, we would realize how much better we would be without them.
It needs to have multiple checks to it. 1) They must enter into a financial program (Dave Ramsey is my choice). 2) They must have a monthly budget meeting for at least one year to get on the right track and create positive habits. 3) Incentivize giving (tithing) to the institution.
I think communities would benefit from pulling people out of the debt spiral so many are in.