Why payday loans are important and affordable
Lately, there has been a lot of misinformation in the media about payday lending. As a five-year employee of Advance America, managing four locations in Warwick, I want to set the record straight on exactly how we operate.
First of all, our customers are teachers, bus drivers, salespeople, and small business owners; they come to Advance America looking for a responsible way to manage the rising costs of gasoline, groceries, utilities and health care, or deal with an unplanned expense.
These hardworking people choose our service because it’s simple, reliable and transparent – but most importantly, they recognize that it’s cost-competitive with their other options. Payday advances, with their one-time fee of $10 per $100 borrowed, can be less expensive than paying the $35 overdraft fee charged by Bank of America or the $37.50 from Pawtucket Credit Union, or the $38 reconnection fee from National Grid for a missed utility payment. Whether a customer repays their loan from us in three days or 14, they always pay the same one-time fee and the interest does not compound.
Our customer satisfaction and repayment rates are both above 90 percent, indicating that our customers understand the costs involved with our service, and choose it because it makes personal and economic sense.
Every single day, my co-workers and I work with our customers to ensure that they receive the assistance they need to manage their short-term finances. They are trying to do the right thing – meeting their obligations and supporting their families – and I am proud of the helping hand that we provide.
As a single mother, with a child in college and another in elementary school, I know what they’re going through. I’ve experienced plenty of life’s ups and downs and understand the pressure they feel. To see my customers walk out of my office every day with smiles on their faces, feeling confident they can overcome those challenges, is very rewarding.
Currently there is a bill in the legislature that would impose an unrealistic 36 percent APR cap on the two-week loans we offer. I wonder if lawmakers fully understand the negative impact proposed regulations would have on my customers’ ability to access credit on our state’s economy, not to mention my livelihood.
Simply put, a 36 percent APR cap would eliminate storefront payday lending. We run our centers as efficiently as possible, but with a 36 percent APR cap, a two-week $100 loan would allow a $1.38 fee – less than 10 cents per day. We simply could not cover our basic operating expenses like wages, rent, utilities, security and supplies on 10 cents per loan per day. My store would close, as would other regulated lenders across the state, resulting in the loss of approximately 75 jobs, including my own.
The unintended consequence for our customers is that they would be left with one less option, possibly forcing them to costlier or less regulated options, such as loans offered by offshore Internet companies. Because these illegal lenders do not fall under the authority of state regulators, they do not provide the same consumer protections as regulated companies like mine, and their loans often involve complex or hidden fees.
At the end of the day, restricting consumers’ access to our valued service would not be good policy. The payday loans we offer at Advance America are a sound choice and an effective short-term financial tool. It would be unfortunate if the General Assembly ignores consumers’ interests and takes them away, leaving hardworking Rhode Islanders to suffer the consequences. People deserve the opportunity to weigh all of their options, including payday advances, and choose the one that best suits their needs.
Donna Rocha is an Area Manager for Advance America.