Opposition to Federal Charter on Payday Loans May be Built on Misconceptions
Debate surrounding HR 6139 continues, sponsored by Reps. Blaine Luetkemeyer (R., Mo.) and Joe Baca (D., Calif.).
ATLANTA, Aug. 3, 2012 /PRNewswire/ -- As the House Finance Committee debates the passage of proposed charter HR 6139 to transfer oversight of online payday loans from individual states to the U.S Office for the Comptroller of the Currency, promoters of the act are keen to dispel some perceived misapprehensions of the industry.
In a bid for more egalitarianism on par with traditional institutions, PaydayLoansOnline.net believe that the charter should be passed in order to widen the ambit of small-dollar online lenders, enabling greater access to more underserved consumers for whom brick-and-mortar lenders of all varieties do not adequately serve. According to research by John Hecht, a former analyst with JMP Securities, a San Francisco-based investment bank, 35 percent of the $32 billion small-dollar loans awarded in 2010 came from online payday lenders. This is projected to hit 62 percent within the next four years.
Champions of the charter are adamant that fears surrounding its potential enactment are based on un-truths. A popular concern is that payday lending leads to a "cycle of debt." Advocates of the bill counter this accusation with reference to numerous public policy analyses, including one from Clemson University that states, "There is no statistical evidence to support the 'cycle of debt' argument often used in passing legislation against [or denying passing legislation for] payday lending." Supporters are also quick to quell the allegation of usury within the alternative lending sphere, citing that the cost of borrowing $100 through an online payday lender is cheaper than many banks' bounced check fees.
Proponents believe strongly that passage of the act will decrease the level of risk exposure to consumers, by standardizing the industry at a federal level with a single codified set of governances. Consumer welfare will be increased, not compromised.
Resistance to the charter comes from various quarters asserting that sufficient state control and regulation already exists for payday lenders, rendering further federal control obsolete. In disagreement, organizations such as PaydayLoansOnline.net wish for HR 6139 to be passed in order to remove restrictions that prevent some individuals from accessing lending due to their geographical positions in some of the thirteen states in which payday lending is prohibited.
For more information on short-term lending according to current state legislations, go to: http://www.paydayloansonline.net/.
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