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Payday Loan Niche Attacked
Payday Loan services are often portrayed in a bad light. Opponents scream this industry takes advantage of those
who can least afford it. States legislatures are making attempts to cap interest rates payday lenders can charge.
It seems everyone is trying to protect you.
I think not. Here is what I think is at work here. Traditional banking has realized their mistake by not servicing
those with bad credit. I believe, they are attempting to use special interest groups and state legislatures to squeeze
out the majority of payday loan lenders. Effectivly eliminating competition.
Why would traditional banking services want to to this?
You have already seen the answer beginning to happen. Credit Unions have started to jump into the Payday Loan
Industry. Banks are sure to follow. I have discuss previously in this blog an interesting trend. California,
Ohio, Virginia legislatures trying to impose a 36 percent interest rate cap on payday lenders in their states.
By creating legislation, this helps create public awareness on the issue. By capping interest rates or atleast
attempting to cap the rate, it helps legitimize the industry in the minds of the public. This is all part of a
PR campaign legitimizing payday lending. What is even more interesting, is that Banks have been part of the payday
loan process the whole time.
Many payday lenders already work through banks in many states. South Dakota is one state where banks and lenders
have created alliances. Payday lenders partner with banks to make loans in states
where usury laws prohibit direct lending at triple-digit interest rates and in states that authorize
payday lending with restrictions.
Only time will tell when traditional banking will become openly involved in payday lending. My notion is 2-3 yrs.
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