Aug 01, 2013 Philip Burgess
For many short term lenders and debt collectors, the federal government's actions have been a pressing concern. Organizations such as the Consumer Financial Protection Bureau seem intent on regulating the entire industry, rather than focusing their attention on individual offenders. However, lenders should also be wary of local groups that may be working against the sector.
This is one problem that short term lenders are facing in Fresno, Calif., according to a recent Valley Public Radio article. Faith in Community has petitioned the city council to limit the municipality's number of short term lenders to 67. This is based partially on the claims of borrowers such as Josie De La Fuente, who received a short term loan more than a year ago.
De La Fuente, like many Americans during the past few years, needed a loan to help pay her bills. Although she was unable to pay off her debt by the time she reached her next paycheck, she was eventually able to complete her payments. Despite the payments causing her stress, she acknowledged the service's usefulness.
Local professionals in the short term lending industry responded to the criticism of groups like Faith in Community by telling the source that they provide a necessary service to the community. They noted that borrowers who properly manage their finances should be able to pay their loans without any issues.
"The vast majority of [short term lending] customers, like with almost every other financial product, they use the product responsibly, they pay it back on time and they're done with the product as intended,"Greg Larsen, spokesman for the California Financial Service Providers Association, told Valley Public Radio.
Notably, the efforts of groups protesting short term lenders may only lead to the market expanding. Sioux Falls Business Journal recently reported that short term lending is a growing industry in the Sioux Falls, South Dakota area. Due to the regulations many banks are operating under, borrowers must seek out alternative credit. A number of the businesses offering it are not covered by local lending rules, which allows consumers to receive the loans they need. Furthermore, the inability of banks to loan directly to borrowers has led the banks to fund short term lenders. Rather than restricting the lenders, regulations have merely caused lenders and borrowers alike to find alternative means of offering and receiving loans.