Payday loans a bad deal but allow the choice

The payday loan industry is under attack across the nation, including here in Arizona, as consumer advocates attempt to eliminate what they see as a predatory rip-off of poor people.
 
Payday loan businesses - sometimes also known as cash advance businesses - have been very successful in recent years. They cater primarily to lower income people who live paycheck to paycheck and find themselves short of money before their next paycheck is due.
 
The system works this way: a borrower comes in and asks for an advance on their paycheck. The business provides cash to the person in return for fees which consumer advocates say are exorbitant - equaling is some cases what would be the equivalent of a 400 percent or more interest rate. Additional costs accrue if the loan is not paid off in the typical two-week length of the loan.
 
It is these high fees that have drawn the attention of regulators and lawmakers, among others. There are efforts to either eliminate the industry or to more strictly control its practices.
 
In Arizona, it is possible there will be dueling ballot measures on payday loan operations this fall, one seeking to eliminate the industry in our state and another seeking to protect it, both claiming to have the interests of consumers at heart. If the measures do make it to the ballot, it could be confusing for voters.
 
The concern about the high fees is understandable. The loans are a bad deal for borrowers who often are already financially strapped and can end up in an even worse situation if they cannot successfully pay off their pay advances.
 
They can actually end up with less money because they get into a repeat cycle of borrowing money and paying high fees, never able to save enough money to pay off their advances.
 
We would discourage any person from taking out these loans, unless they are very disciplined in saving their money and paying off the short-term debt so they do not get into a repeat cycle.
 
But we do not favor a ban on the operations.
 
For some people in need of quick cash this may be their only option, especially if they have bad credit. Should they be denied the ability to make this choice? No, people ought to have the right to make their own decisions on this matter.
 
We do think there should be requirements for full disclosure in plain language of the consequences. It would also be appropriate for consumer advocates to develop education campaigns to explain the dangers of payday loans.
 
But, again, although payday loans are not a wise choice for individuals, it should be their choice to make.