We live in a world where it is easy to get inundated with data, facts, figures and opinions. It is without a doubt that the Internet is one of the greatest achievements of mankind. Being able to access nearly any information ever published with the simple click of a mouse has radically changed the way that we all live our lives. As is usually the case, however, there are also downsides to having so much information ready for consumption, on demand. We human beings can really only meaningfully process so much information in a given amount of time. With so much information being available, it is often difficult for people to critically decipher all of the data that they consume.
Such is the case with payday loans and other forms of alternative lending. There have been thousands of articles and op ed pieces written that bemoan the evils of this kind of lending. Some “financial experts” have gone on record time and time again saying that these types of loans trap people in never-ending cycles of debt. As if traditional lenders didn’t do the exact same thing! Here’s the thing, though. Yes, we have lots of information on hand about payday lending, but the vast majority of this information is clearly anti-payday lending, and is not the type of information that people need to make a logical, rational decision about this type of lending.
Recently, a profession with Thompson Rivers University, Dr. Laura Lamb, said that the government will have to offer more incentives for big banks to offer fair services to underbanked customers, or the alternative lending industry will continue to be the only source these folks can depend on for much-needed financial services and loans.
Dr. Lamb did extensive research on payday lending back in 2012. She was a bit surprised to find that even though payday lending customers pay high fees on their loans, and that some payday loan customers do indeed wind up in debt because of the loans they take out, that these payday advance loan lenders were actually providing a service that is very necessary for financially marginalized consumers.
Lamb went on record saying, “If these places were shut down, the people using them would have nowhere to go.” Lamb did a survey that included 105 residents of Kamloops and she discovered that 78 percent of the people in this area that use payday loans made $20,000 or less each year. The money these people get from payday lenders were being used to take care of necessities, like bills, rent, food and medical care. She also found that many of these people had mainstream bank accounts, but that these banks were unable to provide the consumers with the basic financial services they need.
Lamb suggested that her financial literacy survey found no link between a person’s financial know how and their use of payday loans. She went on to say, “People don’t use these places because they’re not financially savvy. They use them because they don’t have any other choice,” said Lamb. “The people who are using them are just digging themselves deeper into poverty.”
Lamb is certainly not someone that people would describe as a supporter of the payday lending industry. However, her findings have proven that these types of lenders offer valuable financial services to marginalized borrowers, services that traditional banks and credit card companies are not willing to offer at the current time. As such, it is apparent that alternative financial providers, like payday lenders, offer vital financial services to millions of people from all walks of life.