THE OCT. 26 EDITORIAL on payday loans misleads readers by parroting myths regarding America's most-misunderstood financial-service product.
The editorial centers on the mythical "cycle of debt." SEC filings of public lenders state that 94 percent of loans are paid back on time. Furthermore, the Community Financial Services Association requires members to follow its best practices, which limits rollovers to four (fewer if required by law) and provides for an extended repayment plan.
If this "cycle of debt" were as widespread as claimed, and loans truly "predatory," common-sense market mechanics dictate the product would have died years ago. Yet payday loans have endured for 20 years, with 12 million Americans using them annually. Why? Consumers who get burned by a product do not use it again, yet payday loans scored a 90 percent satisfaction rate in a 2008 George Washington University study, with complaint rates so low that opponents won't even cite them in their own studies.