But the writers of this week's series have taken their calling a step further. They have taken a stand against an industry they know little about, an industry they have never used or needed. In their fervor to help the poor, they have launched a campaign to take away the financial freedom of the thousands of Alabamians who — for countless reasons — need a cash advance on occasion.
I am writing as a representative of Borrow Smart Alabama, a group of more than 225 Alabama payday and title-lending stores that have joined together to encourage the wise use of short-term loans and to help the public better understand our services.
The Star has spun quite a web of tales this week, pulling at your heart strings with stories of elderly and disabled people who have gotten themselves in trouble with short-term loans. So, indulge me while I share one of my own about an Alabama woman named Kim.
Kim was a registered nurse with a decent salary, but she hated seeing large chunks of her hard-earned paycheck go toward paying mostly interest on the credit cards she had run to their limits. Her ticket out of debt was the completion of a 26-month program to earn certification as a nurse anesthetist. She qualified for financial aid and found some scholarship money, but in order to finish school she had to cut back on her hours at work, which meant being short on her monthly bills. In order to keep her debt paid while working her way to financial freedom, she used short-term loans.
(Check out a video of Kim at www.borrowsmartalabama.com, where she will tell you that she "feels very strongly that she could not have fulfilled that dream without the service of the short term loan.")
Kim's story, along with several others you will find on the Borrow Smart Web site, are the sort of stories you never hear about short-term lending customers. It is also rare that you are told that the average cash advance customer is 39 years old with an annual salary of $41,000. Hardly the disabled and elderly "victim" we are painted as serving.
While the writers of this series criticized the fees associated with our loans (typically $15 per $100 borrowed), they failed to mention that banks charge an average of $29 for overdraft and non-sufficient fund fees and credit cards charge an average of $37 for late payment — fees that customers often avoid by taking out a short-term loan. And, like our fees, these are not APRs, but are one-time fees for a service.
The writers of this series pointed to Georgia and North Carolina, where legislators have capped fees so low that short-term lending no longer exists. They failed to mention that an independent study by the Federal Reserve reported that "Georgians and North Carolinians do not seem better off since their states outlawed payday credit: they have bounced more checks, complained more about lenders and debt collectors, and have filed for Chapter 7 ('no-asset') bankruptcy at a higher rate."
The writers of this series also pointed to experts to back up their claims. Several times they reference the Center for Responsible Lending, though they failed to mention that the CRL is funded by a large credit union — the most outspoken competitor to short-term lenders. They also missed the fact that Veritec Solutions, which supplied the data CRL used, said in 2007 that "the CRL misinterpreted (Veritec's) data to come to flawed conclusions."
The writers of this series highlighted the short-term lending industry's big profits, pointing out that the industry has annual revenue of $6 billion. To add a bit of perspective, commercial banks have annual revenue of about $480 billion, savings banks $84 billion and credit unions $36 billion.
In a time when more and more people are reaching the breaking point and looking for ways to, like our friend Kim, secure a better future for themselves, our state Legislature certainly has a roll to play. Their roll is to ensure the availability of good jobs in this state, to demand fair taxes, to provide an education that sets our youth up for a bright future — not to take away access to credit that can help Alabamians.
Borrow Smart recognizes that our industry has a roll to play as well. Our roll, as we see it, is to treat customers with integrity, to make sure that every customer understands the conditions of his or her loan, to advise them wisely and honestly, and to provide extended payment plans when necessary. Our members have signed a code to promise these things and more. Find it at our Web site and on the walls of our stores. Furthermore, this year we will launch a community education program to help teach Alabamians about building good credit and avoiding unnecessary debt.
We welcome other ideas for ways that we can be a part of the solution to the growing debt in this country — the large majority of which is owed to credit cards and traditional lenders, not short-term lenders. But restricting financial freedom is not the answer. It hasn't helped consumers in other states, and it won't help Alabamians. We also welcome this debate and the opportunity to clear up the many untruths that have been presented as facts by self-serving groups like the CRL.
The writers of this series have talked about moral obligations, and our moral obligation is to stand up for the thousands of hard-working Alabamians who choose to use our services. We are committed to treating them with respect and to protecting their right to govern their own lives — a right they've earned as Alabamians and Americans.