WASHINGTON, Dec. 12 /PRNewswire/ -- Calling it part of a growing body of economic research underscoring the consumer need for access to short-term consumer credit products, Cole Kimball, Executive Director of the Online Lenders Alliance, today reacted to a Research Report issued by the Federal Bank of New York that concludes state bans on payday loans result in increased credit problems for consumers as well as placing a definite strain on a State's economy as it relates to increased bankruptcy and credit defaults.
"This study makes a clear connection between the elimination of consumer's ability to have access to the widest range of lending products and their well- being," said Kimball. "When access to payday loans was terminated, consumers were forced to find short term capital to cover everyday expenses with other more costly alternatives such as bounced checks, overdrafts and credit card cash advances."
The study, entitled, "Payday Holiday: How Households Fare after Payday Credit Bans," by Donald P. Morgan and Michael R. Strain, Research Officers with the Federal Reserve Bank of New York, reviewed how consumers in Georgia and North Carolina have been impacted since those states banned payday lending in May 2004 and December 2005, respectively.
In their findings, Morgan and Strain state, "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 ("not asset") bankruptcy at a higher rate."
The study is based on specific research that is the first of its kind that looks at the state enactment of policies banning payday lending and the impact over time on consumers. Other research into this topic makes similar conclusions that consumers are worse off because of the policymakers limiting their lending options and, in fact, may have been better served by having access to payday advances for short-term, small dollar loans.
"Consideration of the adverse and costly economic impacts for Georgians and North Carolinians detailed in this study must be part of the policy equation for this issue," said Mark Curry, Board President of the Online Lenders Alliance. "When policy makers rush to judgment without considering the ramifications of their actions consumers are hurt. This study makes that case quite clearly."
The Online Lenders Alliance is a professional trade organization representing the growing industry of U.S. based companies offering online consumer micro-loans, also known as payday loans. OLA was founded several years ago by a small group of industry leaders who believed that the ability of consumers needing short term, unsecured micro-credit could be threatened without standardization of principles by which these loans are made over the Internet. All OLA member companies abide by a List of Best Practices and Code of Conduct to ensure that customers are fully informed, fairly treated and are using all lending products and practices responsibly.
Online Lenders Alliance
