Lending industry needs regulation

KPC News Service

Payday lending, in some ways, is a necessary evil, which is why the state of Indiana regulates it.

But as lawmakers and other leaders review the industry, we encourage them to look for options that are not predatory in nature.

When a person is in such financial peril that the person considers a high interest loan, that person likely needs more than money. While the money may serve as a temporary fix, the person using a payday lender most likely does not have the ability to pay back the loan on time and cover basic living expenses. As a result, the person ends up paying off one loan, only to take out another, creating a vicious cycle of debt.

At the same time, these individuals need the money to pay bills, and money doesn’t grow on trees. Payday lending is in business because a need exists.

The payday lending industry contributed more than $200 million in total value added to the state’s economy in 2007, according to an IHS report. The impact is estimated to be greater now due to industry growth.

As Rep. Woody Burton, R-Whiteland, noted on the subject: “I don’t want to put down these kind of lending organizations. They fill a need out there. I don’t think it’s a good thing, but I think it’s a necessary thing. If it’s going to be out there, I would much rather it be done in a regulated process than in parking lots.”

This is a valid point.

So how does the state ensure Hoosiers needing financial assistance have an opportunity to secure it without risking too much?

This is the real question that needs to be answered, and we hope a study committee has the opportunity this summer to explore the current regulations and some programs being started by nonprofits such as Brightpoint in northeast Indiana.

Under Brightpoint’s program, local residents have an opportunity to borrow a small amount. But, although the interest rate remains high due to the high historical default rate of such loans, the period of time a person has to pay off a loan is much greater.

This provides more time for a person to pay off immediate expenses and, then, the borrower has enough time to pay off the loan so that it does not impact the person’s everyday living expenses.

This is one solution that provides a greater opportunity for people to get back on their feet.

It may be time to incorporate some of the nonprofits’ efforts into industry regulations so that less people fall down the financial crisis rabbit hole, so to speak.

While payday lending is serving a need, and all businesses are in business to make money, the state needs to protect and educate consumers, especially when they are vulnerable due to a financial situation.

This was distributed by Hoosier State Press Association. Send comments to dr-editorial@greenfieldreporter.com.