Limiting payday loans with the Consumer Financial Protection Agency could have a negative effect on those who are dependent on the loans, according to experts who oppose the recently proposed consumer protection agency.
In an article for the Credit Union Times titled What if Payday Loans Go Away?, those who feel the agency – which was approved recently by the U.S. House Financial Services Committee – argued that short term loans have shown their importance because of how useful they have been for those in need of money.
David John, a financial services and banking analyst for the Heritage Foundation, argued that limiting or eradicating payday loans would be a “stupid move” because people who depend on the industry could potentially turn to loan sharks or other illegal means if desperate for money with no other alternatives.
“Banks and credit unions always used to do that sort of lending to their strong members and customers, but it’s not clear they would do that sort of lending to some of their more marginal customers or members,” John said. “And those are the folks who are more likely to need a payday loan.”
Community Finance Services Association of America president D. Lynn DeVault added that the organizations trying to adjust or ban payday loans were not speaking on behalf of those who do use the loans, and that banning them “would be devastating to many families.”
