Payday loans borrowers have rights. They've the right to know simply how much their loan is going to cost them. They have the right to give back the money they borrowed before the end of the day if they choose they changed their minds. They have the right to know concerning dispute resolution. The funny thing is they have the right to know so much, that nearly all payday loan places will give you a couple pages of fine print on your rights and have you sign something at the bottom stating you surrender your right to a jury trial and you do so willfully. In spite of the volumes of information payday loan stores give, individuals see themselves going to payday loan places and signing on the dotted lines in any case. It makes one wonder whether knowing is enough. How could one know and yet decide on something which has been compared to usury? Is it lack of knowledge, lack of concern, or something else altogether which keeps the industry in customers at such a rate that the business seems to be successful while other businesses are thrashing?
To say the matter raises doubts is an irony. It's tough to have sympathy for an industry which seems to have thrived while the country is experiencing one of the toughest monetary disaster in current memory. The payday loan industry has certainly profited, having become in fact, "$28 billion industry nationally, according to the Center for Responsible Lending" (Associated Press, 2007). As the industry develops, it leaves us wondering how individuals would willingly pay 480 percent. Ray Fisman, in The Dismal Science, raises the question "Do human take out payday advance loans because they're desperate, or because they don't understand the terms?" What Fisman almost asks but doesn't is are individuals stupid or don't they know that one $500 loan from these organizations potentially costs them $2692 a year? These seem to be the same individuals who then blog queries like, "Is my payday loan place going to have me arrested? Are these businesses preying then on the stupid?
Yet, no one is forcing them to go. Or are they? It has been suggested that our current economic crisis has made it almost impossible for the average person to obtain a loan in any other fashion. In response to the push for more stringent borrowing practicing, traditional banks are turning away traditional borrowers. Maybe it is not a coincidental bond between the push by banks to be stricter and the responsiveness of the fringe industry to develop as a result. Cash loan lenders aren't stupid. Like every aggressive kid, they know there is a limit to how far you can push until you get, proverbially, smacked in the head.
President Obama has made a point of stating that America, to be financially strong, should be able to have credit. If this is the case, we are looking at a new wave of Americans who have been forced out of the credit game, disenfranchiseed by a banking industry which was careless enough to loan to foolish consumers forcing mainstream America to pick an even stupider path.