Payday Loan Defaults
Do Defaults on Payday Loans Matter? Ronald Mann Columbia Law School
By: Jer Trihouse. The CFPB continues to attack the payday loan industry based on biased data collection and, quite frankly, the CFPB bureaucrats distaste for a financial product millions of consumers “vote” for by using. Thus, this essay by Ronald Mann at Columbia Law School will not be easily digested!
Mr. Mann’s findings reveal that consumer use of payday loan products is “at most a single step in a protracted experience, and by no means a particularly important one.”
In other words, payday loan usage is not the cause of catastrophe for consumers but rather their last gasp at the end of a 2 year path of never ending financial duress. After all, payday loan borrowers at this stage of “the game” are sophisticated enough to know that there is really very little a lender can do to them.
- We don’t report them to the major credit bureaus
- The borrower’s credit is already severely damaged
- We can call them; but they don’t have to answer
- We can email them
- We can text them
- In some cases we can draft their checking account via an ACH
- Formal litigation is not cost effective
- The most serious result of not paying us is their inability to return to us for another emergency loan
- MANY borrowers in today’s world of online lenders plan to default immediately! It’s a “strategic” decision much like those made by underwater home owners in the last Great Recession
- It’s a lot easier to blow off a “big bad ass Internet payday lender” than it is to tell their local payday loan store front owner Danny on the corner to pound sand.
From R. Mann’s essay:
“What is more interesting about the findings is how they situate the payday loan default in the timeline of the borrower’s financial distress. The premise of a regulatory regime [he’s referring to the CFPB] that targets the payday loan as the central cause of financial calamity is that borrowers are slipping along in circumstances that are tight but manageable, but that the default on the payday loan tips them over the edge into unmanageable impecunity. The data analyzed here, albeit sketchy, undermine that vision in several ways. The first is that the payday loan is plainly not the beginning of serious financial problems.”
Here’s a link to R. Mann’s full ESSAY [via Bitly URL Shortener)
Here’s a link to R. Mann’s full ESSAY[via Google URL Shortener)
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