One of the contributors to this site is Mrs. C8j, and last week she handed me an article from the Globe and Mail that absolutely flabbergasted her (admittedly Mrs. C8j can actually rant better than I can), written by Sean Silcoff with the title, “Expensive but not excessive: why Pay Day Lenders Aren’t a Rip Off”. Most of my readers know my opinions on these modern-day Loan Sharks, however, if you want to know my opinion read Pay Day Loans the Crack Cocaine of Personal Finances.
After reading the title I figured this was a misdirection story, where if you read the actual article the writer is actually saying the opposite and is attempting to suck you in with an inflammatory title, but I was dismayed to see that this really was not the case. I’d include a link to the article, however it is behind the Globe’s pay wall, and you have to be a Globe Subscriber to read it (click here if you are a Globe Subscriber).
The article is actually quite hum drum (not written in my style of ranting like a lunatic in every paragraph), and I kept wondering what tripped Mrs. C8j’s Rant-Fest, and then I read the second to last paragraph, and I must admit my flashing red-light rant-o-meter went off as well.
Given the fact the Globe protects this content with their Pay Wall, I will paraphrase what is said:
BCM thinks it says, “… this is a regulated business that doesn’t make a lot of money because they deal with bad borrowers and thus shouldn’t be viewed with scorn…”
The phrase that really caused me to almost choke on my coffee was, “… quick and convenient source of moderate amounts of cash…”. That reads like something out of a Pay Day Loans store’s brochure, “… quick and convenient …”?
Those are actually two criteria I always use when choosing a lender, also what kind of hot chicks they have in their ads (since everyone knows that hot chicks dig dudes who use Pay Day Loan services) (for those sarcastically impaired my apologies for me not marking this paragraph as a sarcastic opinion on my part).
Pay Day Loans or Loan Sharks?
The gist of the argument put forward in the article seems to be that because Pay Day Loan companies don’t make a lot of money, thus we shouldn’t view them as a modern-day Shylock (I use that as the vernacular for Loan Shark, not as a derogatory antisemitic term). My opinion is that Pay Day Loan Store Fronts aren’t making a lot of money mostly because there are so damn many of them (in downtown Ottawa, in the core, there is pretty much a pay day loan store front on every block).
Yes their customers are folks who may not pay them back, but my guess is they are not making a fortune on their 500% per annum loans due to a glut in the market. There are more pay day loan shops than banks these days, and now with competitors getting rid of their store fronts and running solely as Internet Web Sites, this industry could be ready to make even more money off their customers (following the lead of the Banks and other service industries).
The final paragraph seems to be borrowed from Dr. Henry Morgentaler, in that it is preferable for Pay Day Loan customers to use this legal service as opposed to a more dire choice (i.e. loan sharks). My view of that is: maybe it would be better if we had credit counselling services on every street corner instead? I am not making any statement about Abortions or Gun Control either (let’s deal with one controversial topic at a time).
MER : A Worm in the RESP Money TreeI honestly don’t understand why the Globe would publish this story, or why it was written, any ideas good reader? What’s next, articles defending the High MERs in Canadian Mutual Funds?