On Thursday, May 13, 2010 Richard (RJ) Eskow, a blogger for the Huffington Post, responded to critics after RJ blasted payday and personal loans. Essentially, RJ called the system “evil”, and even admitted such in his defense, and he objects to being called a “Doofus Major du Jour” and a “pig.” Still, you have to wonder if RJ was that far off in his comparisons.
Banks Create the Need for Payday Loans
RJ states that banks freeze out the poor and those with bad credit. He also states that the banks are “deeply embedded” in the payday and personal loan industry. Therefore, the banks intentionally “freeze out” desperate clients, which sends these people to outrageously high payday loan industry shops. Since the banks are the ones that intentionally neglected these people and then effectively drove them to the payday loan industry with whom they are deeply embedded, isn’t that the same as entrapment? After all, the people wouldn’t be paying outrageous rates for cash advance and payday loans if the banks would have given them personal loans to begin with.
Why is it Illegal to Give Military Personnel a Payday Loan?
Many people are not aware, but a law has been past that effectively shut down payday loans to military personnel. It limits how much interest anyone can charge military personnel and that limit is well below the 49% or more interest rate of your average cash advance loan. Additionally, the law puts restrictions on how close a payday loan shop can be to a military base. This is why you won’t see a cash advance or payday loan shop in Hawaii. The law effectively made it impossible to legally set up a shop because you cannot get far enough away from a base.
Do We Care that They Need It?
The major argument for payday loans is that the people need it. Without them, the people would have no way to borrow the money they needed. However, RJ made a valid point. At one time, indentured servitude was legal. Poor people desperately needed money (i.e. a personal loan). They sold themselves to others for a set amount of years in exchange for the money. As a civilized country, we decided this was not fair and that the practice must be stopped.
I am willing to bet that it won’t be long until we will find that a 50% interest rate is unfair and the practice must be stopped as well. As a democratic and civilized country, we must come together and decide if it is morally right to charge poor Americans exorbitant fees just to receive a loan. Until we decide, the war of words and money will continue on.