Wealth Finance

This continues an exploration of Richard Eskow’s Huffington Post article “Usurious Payday Loans: Myths, Flawed Studies, and Solutions.”  If you missed part one of this article, Richard Eskow and the Burden of Proof, CLICK HERE.

Richard Eskow: Do payday loans exploit ‘at-risk’ groups?

Richard Eskow attacks an Elliehausen study regarding whether payday loans target “at risk” people, but he does so by simply stating that Elliehausen has published papers that support the payday loans industry. Then he cites papers from the other side that say otherwise. The sample group for Elliehausen’s study is derided by Eskow for being voluntary rather than random, and Eskow claims that there could be sample bias. Further exploration as to the motivations of the sample group for participating would be needed before Eskow could prove that Elliehausen’s study was tainted. As it stands, this becomes a “he said, she said” situation, hardly proof of his side’s superiority. Again, the burden of proof rests upon the shoulders of the accuser. And Richard Eskow isn’t making any headway. Nothing he says disproves these findings by Elliehausen (as cited previously in this very blog):

• 63 percent of customers are the heads of young families.
• Only 10 percent are 65 or older, indicating that the elderly are not being exploited or targeted as most critics claim.
• Customers typically have “lower and middle incomes”; 41 percent earn $25,000 to $50,000 per year, while 39 percent earn $40,000 or more.
• Higher income payday loan customers (those who earn more than $50,000) make up a larger share than those in the lower bracket ($15,000 or less). This refutes the idea that the poor and destitute are being “targeted.”
• 90 percent of customers have a high school diploma or better, while 54 percent have attended college or have a higher education degree.
• General indications are that payday loan customers have limited access to credit, yet still use payday loans sparingly.
• A whopping “81 percent of customers recalled receiving information on the annual percentage rate for their loan” and were aware of overall costs.
• Even more telling, 86 percent of no fax payday loan customers said that the product was a “useful service.”

For good measure, here are some other academic studies that show how payday loans benefit consumers. Mr. Eskow, satisfy the burden of proof. That’s the way it works in America.

Payday loans have appeared because there is demand

The sensationalist argument that payday loans stores have sprouted faster than fast food restaurants since 1990 is all flash and no substance. The growth has little to do with some diabolical plot and everything to do with filling a need. Banks refuse to lend to consumers who do not meet their credit requirements. Payday loans fill the gap for customers who need short-term credit (such as to pay a utility bill to avoid shutoff, or to repair a commuter car and make it to work) and can get said credit in no other place. It’s a means to an end that 94 percent of its customers use in a responsible fashion – 94 percent do not roll over loans, according to long-existent industry materials (such as those of Advance America, Form 10-K, which Meyers suggests that Eskow read).

(Photo Credit: http://www.flickr.com/photos/22280677@N07/ / CC BY-ND 2.0)

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