The Exploitation and Ingenuity of the Payday Loan Industry

...

all the cases, borrowers were required to sign a disclosure stating they understood the fees, contract rules, loan process, and payment options when it is evident that majority of the clerks failed to even disclose such information during the loan inquiry.

On the contrary, while the industry is being scrutinized for its seemingly absurd business model, Payday loans can arguably provide many advantages to those who don’t abuse the system. According to a 2005 study (Ernst, Faris & King), the recommended use of payday loans stretch out to 5 uses per year. If borrowers use payday loans as they were intended – which is an emergency source of cash within a few hours rather than extended loan payments cycles, payday loans can provide several decent benefits. Bank loans can require days, if not weeks, to approve. With such forms of credit designed for long-term periods, requiring collateral, and decent credit scores, there are no other credit products on the current market which can provide short-term one to two week advances under such circumstances. Payday loans also do not require high credit scores, allowing even those who have damaged, or unestablished scores to be eligible for borrowing. Payday loans can also be used to protect credit scores when extra cash is needed to meet financial obligations, or even to avoid bounced checks and overdrafts, which in many cases can exceed the one-time required borrowing fee. Advocates in payday loans argue that rather than their business model being deemed unfair, borrowers who abuse the system are mainly to blame.

Therefore, in a capitalistic society where there is emphasis on profit-generation, the payday loan’s business model can be referred to as a “genius system” to make profits. However, skewed by the large number of uneducated and underprivileged individuals who are either misled or are misusing this model as a means to survive, has significantly amplified the accumulation of debt in countries such as Canada, US, and the UK. Despite each viewpoint, much research needs to be conducted in the future to see if the economic benefits outweigh the risks.

Works Cited

Barth, James R., Jitka Hilliard, and John S. Jahera. "Banks and Payday Lenders: Friends or Foes?" International Advances in Economic Research 21.2 (2015): 139. ProQuest. Web. 30 May 2015.

Bhutta, Neil, and Paige Marta. "Payday Loan Choices and Consequences." ProQuest. N.p., 1 Mar. 2015. Web. 30 May 2015.

Buckland, Jerry, Tom Carter, Wayne Simpson, Anita Friesen, and John Osborne. "Serving or Exploiting People Facing a Short-term Credit Crunch?" A Study of Consumer Aspects of Payday Lending in Manitoba (2007): 6-77. Serving Exploiting. Public Utilities Board, 15 Sept. 2007. Web. 30 May 2015.

"How KC’s Wealthiest Enclaves Became a Shadowy Nexus of Predatory Lending." Pitch. N.p., n.d. Web. 30 May 2015. <http://www.pitch.com/kansascity/payday-loan-industry-scott-tucker/Content?oid=4044440&storyPage=2>.

Kurban, Haydar, Ph.D. "Economic Impacts of Payday Loans." Economic Impacts of Payday Loans (2011): 2-5. Web. 30 May 2015.

"Payday Loan Companies Exploit Poor Americans for Billions." OpposingViews.com. N.p., 13 May 2013. Web. 30 May 2015. <http://www.opposingviews.com/i/money/personal-finance/payday-loan-companies-exploit-poor-americans-billions>.

"Payday Loans, Advantages and Disadvantages." Lendersuscom RSS. N.p., 18 Apr. 2013. Web. 30 May 2015.

Rivlin, Gary. "Meet the Man Who Made a Fortune Exploiting the Poor With Payday Loans." Meet the Man Who Made a Fortune Exploiting the Poor With Payday Loans. Alternet, 06 July 2010. Web. 30