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Short term lenders defend their industry

Jan 11, 2011 Todd Milner

Short term lenders defended their business before the House Banking Committee in Mississippi recently, as a state law enabling such nontraditional credit sources is set to expire in 2012. Lawmakers are debating whether to let the current legislation expire, which would drive out such businesses from Mississippi, or to adopt a bill that would reenact the current law, but with a few reasonable compromises, reports the Clarion Ledger. Committee Chairman George Flaggs plans to introduce a bill soon that will offer a compromise to save the short term lending industry while also cutting the state's interest rate, which currently stands at 572 percent, one of the highest in the nation. Before the committee, Dan Robinson, president of Financial Services Center, told legislators that, although the interest rates for loans are high, the cost is far less than what credit card companies charge for late payments or what utilities require to reconnect services. According to The Freeman Online, short term lending cannot be called predatory because customers voluntarily sign a contract agreeing to the terms of each loan. The exorbitant fees are based on a loan lasting approximately 14 days. If the loan were to be carried out into a full year, interest rates would be near 400 percent. However, the loans are never carried out that long. For many people, the fee associated with the short-term loan is seen as an appropriate trade-off, as the timeliness of the loan wins out. "The short term loan option is better than going hungry between paychecks," explains the website.