Community Commentary

This summer, the Legislature took the opportunity to debate payday loans. And throughout the debate, we continually confronted the negative stigma associated with the industry. Too many people have failed to fully consider this industry for its consumer benefits, and have been quick to accept the critical assessment that it is a predatory industry; frankly nothing could be further from the truth. It's our hope that in this small space we are able to shed some light on an industry that is providing a critical credit option to people who are working hard to make ends meet and often living paycheck to paycheck. When considering the customer, the most profound argument in support of payday loans lies within the numbers. For example, the average payday loan customer is 39-years-old with an average household income of $41,000; 86 percent of payday lending customers have a high school diploma or better and 52 percent are college graduates. That's pretty impressive. But also take into consideration that 45 percent of payday lending customers are homeowners. It's not hard to think of someone you know who meets this description. If that's not enough, take this into consideration as well: 100 percent of payday loan customers have a steady income and an active checking account, because it's required in order to receive a loan. Payday lending in New Hampshire is a legal business and they operate just like other ones in the state. They rent space, they have employees, they provide benefits, they pay business taxes and they sell their product to consumers. (And those consumers choose payday loans because they have determined that it's the best option for them and for their families.) This sounds like many of the retailers we were busy visiting throughout the holidays. Additionally, payday lenders are regulated by the New Hampshire Banking Commission, and strict guidelines govern their operations. The next time the Legislature meets, they will take up House Bill 267, which deals with the lending rates of payday loans and a compromise bill, House Bill 620, which further regulates the industry. Opponents of the compromise would like to reduce the rate to $1.38 per $100 for a two-week loan. If this happens, the payday lending industry in New Hampshire will cease to exist and the customers it serves will be without an alternative. Essentially, we will drive an industry out of New Hampshire – through overregulation — that had zero customer complaints in 2006. This is not the way we believe that business is done in New Hampshire, nor does it send a favorable message about the business climate in the Granite State. Our purpose as elected officials is to protect consumers — eliminating the payday loan industry is not the answer. This month, staff members of the Federal Reserve Bank of New York issued preliminary findings that show consumers suffer when payday loans are banned. Both Georgia and North Carolina have banned payday lending practices in recent years, and as a result there's been an increase in bounced checks, Chapter 7 "no asset" bankruptcy filings and complaints about lenders and debt collectors. If New Hampshire proceeds to ban payday lending, we will face the same realities. (In fact, the Oregon legislature recently passed legislation with a similar rate cap as the one being considered here, and virtually all payday lenders have shut down.) Whether you like it or not, payday advance loans can be a valuable option for some who find themselves in need of cash-flow assistance between paychecks. For those who believe that eliminating the industry will solve the ills of America's spending problems, it's clear that this is not the magic bullet. To the contrary, the evidence is quite overwhelming that the opposite will occur and more Granite Staters would likely experience financial hardship. The compromise legislation, House Bill 620, is a fair way to regulate the industry to further protect consumers, without ending payday lending as a reasonable lending option in our state.It is interesting to note that testimony before the Commerce Committee was that last year there were 160,000 pay day loans and 10,000 title loans taken out in New Hampshire. Whether we like these loans or not, there is a demonstrated need for them.