To the Editor:
A recent letter by Douglas R. Knight Jr., director of operations in Rhode Island for Check 'n Go, would have readers believe that taking out a payday loan, which nationwide traps the average borrower in nine transactions per year at 260 percent annually, is better than an occasional overdraft fee.
The truth is that a bad deal is a bad deal. Payday loans are designed to lure struggling Rhode Island families with promises of emergency cash into a cycle of repeated borrowing. Studies have found that people who took out payday loans have difficulties paying off their bills and nearly doubled their chances of filing for bankruptcy.
Payday loans don't help borrowers with other predatory fees. In fact, as Harvard Business School Study found, 260 percent payday lending makes matters worse because borrowers end up deeper into the hole, resulting in more fees and many ultimately losing their checking accounts.
Mr. Knight and other payday lenders appear simply unable and unwilling to acknowledge those harms and are desperate to talk about anything but their own toxic product. These types of tactics have led me to believe that Rhode Island needs to revoke the special deal granted to payday lenders in 2001 that allows them to charge triple-digit interest rates. Perhaps then, families in Rhode Island will have real affordable financial options to choose from instead of just another debt trap.
Representative Frank Ferri