There Are Always Alternatives to Payday Loans

Libertarian blogger Ken Santema disappoints me with his opposition to Initiated Measure 21, the real 36% rate cap on payday loans. He knows the payday lenders play dirty pool—he admits he himself fell into the payday-lending trap—but he mistakes that exploitative business model for a necessary industry:

I am going to vote NO on IM 21; and on the payday industries proposal in Amendment U. Many people don’t like the payday loan industry. But the payday loan industry fills a need in the market that unfortunately many people must utilize. I myself was caught in the payday loan trap for a long stretch some years ago. And yes, it was a trap. Yet at the time I had no other real option if I wanted to stay gainfully employed and make my vehicle payment. At the same time I wish the payday lending industry would stop with the dirty tricks in fighting against IM 21. It makes it hard to defend a position of No on 21 when the payday lending industry is making itself look just as bad, if not worse, than the cliché evil corporations many would portray payday loan executives as [Ken Santema, “A Look at Initiated Measure 21, 36% Payday Lender Cap,” SoDakLiberty, 2016.08.09].

As Mr. Spock said, there are always alternatives. If we let payday lenders portray themselves as the only alternative for the poor and unfortunate, we surrender to an exploitative business model that keeps people poor and unfortunate. Down on your luck? Behind on your bills? Ask your boss for help. Ask your friends. Ask your church. Ask your mom. Take that night receiving job. Or do without. Those options may be less convenient—the charitable options may make you feel obligated to return the favor when you’re back on your feet—but they are also less immoral and less likely trap you in dire financial straits.

8 Responses to There Are Always Alternatives to Payday Loans

  1. Donald Pay

    I think we need to start treating banking and other financial operations as utilities. When credit ratings are used to evaluate job candidates and many employers require you to direct deposit paychecks, the financial world has become as important as the electric utility in a person’s ability to survive. So, in order to make their outrageous profits, banks and credit unions should be required to open up public service lending at low interest rates for the poor and lower middle class. This could be accompanied by required financial classes and help in budgeting, etc.

  2. As a Libertarian, Ken Santema starts with the position that adults have the freedom to make their own decisions about financial matters, even if those decisions are potentially harmful. It’s nobody else’s business, essentially.

    However he undermines his argument when he says, “at the time I had no other real option if I wanted to stay gainfully employed and make my vehicle payment.” So it wasn’t really an arms-length agreement he was making. He was at the mercy of the loan sharks, and they took advantage of the situation. That’s the position so many South Dakotans are in.

    If we start with the proposition that the government should have at least a minimal role in placing limits on vice – drugs, alcohol, gambling – then it’s not a stretch to extend that role to another vice from which some people find it difficult or impossible to escape on their own – payday lending.

  3. Roger Cornelius

    If we want to knock knuckles out of a job, we need to come up with viable options to payday lenders.
    Cory has a good list for those that are in an immediate financial bind by asking friends and family for help.
    The next step might be to be to put some muscle behind community coops, all that is needed is some organizational abilities, the state has some useful information on coops.
    I bank at a community bank in Rapid City, they are small and you always see the same people that know you and provide excellent service.
    One of the services the bank provides is a money management account that isn’t just for the wealthy.
    Money managements accounts help people that are employed or retired manage their finances so they don’t end up in payday loan trap beholden to knuckles every week.
    If we are successful in kicking payday lenders in the balls, we must provide some readily available services to help those caught in their trap.

  4. bearcreekbat

    Don’t forget about the availability of a zero or low interest loan from the local County General Relief program as an alternative to a payday loan. Informing the public about our tax funded County General Relief programs, which exist in every single county in our State, would serve an important need of low income families and earners for immediate financial assistance in an emergency.

  5. [deleted for feigned illiteracy—CAH]

  6. Darin Larson

    As the saying goes, with friends like payday lenders, who needs enemies. I agree with Cory that there are alternatives to payday lenders for most people.

    But keep in mind that payday lenders are not a panacea for people. There are people who get the payday loan and still go broke. There are people who get a payday loan and are mired in the high interest payment cycle for years at a time. Either of these types of people and many more may be better off without the “choice” of going to an exploitative payday lender.

    We also need to work on making the alternatives to payday loan sharks as easy as the payday loan sharks make it to get in a perpetual cycle of high interest debt.

    I view this as an issue of morality. We can no more countenance these immoral loans than to countenance other immoral conduct.

  7. [deleted for feigned illiteracy—CAH]

  8. You can’t fix stupid, Kris. Tell your bud to toke up some of the demon weed and then go put the rest of his money into the lottery machines so my taxes stay lower.