Truth in Payday Lending – The Online Lenders Alliance Sets the Standard
It’s important to understand the truth about payday loans–or any loan or type or credit–before agreeing to the terms. The recent rise of the OnlineLendersAlliance1 (OLA)has happened in response to lots of misinformation, hyperbole and politically motivated horror stories.
People who want to request a short-term or Internet loan–at an office location or from the comfort of their homes–bear responsibility for using the loans as intended and being able to repay short-term loans in a lump sum when they’re due without compromising their abilities to pay bills and essential living expenses.
Payday loans can be a lifesaver for people who need immediate cash and don’t have any other way to get the money. Getting accurate information about loan products to the public is why multiple online lending associations, such as OnlineLendersAlliance.com, have been organized to foster best practices among lenders, provide industry responses to the CFPB’s excesses and educate the public about responsible borrowing practices.
It’s almost as expensive to handle the paperwork for short-term payday loans as it is for larger, long-term loans, but payday loan companies only get to earn interest for a few days or weeks. That’s why these companies have to charge higher interest rates that seem outrageous if converted into annual interest rates. However, when you consider the larger number of nonpayments these loans generate and the high administrative costs involved in earning short-term interest, the rates these companies charge are reasonable and in line with what other financial companies charge for different loan products.
Online Lenders Alliance (OLA) Helps to Bring Clarity to Payday Lending
Despite rates that even professional analysts admit are reasonable under the circumstances, politicians find that a few of the people who become trapped in cycles of debt with payday lenders suffer overwhelming interest charges from getting multiple loans, which primarily occurs because the borrowers couldn’t reasonably afford to repay the loans from their next paychecks or they spent the money unwisely on drugs, alcohol, gambling or compulsive buying habits.
Millions of people suffer from debt burdens and interest charges from student loans, unaffordable car payments, upside-down mortgages, bad investments and credit card debt, but those lenders haven’t been targeted with the same dedication that opponents of payday lending employ. Political pressure and intense lobbying resulted in Congress creating the Consumer Financial Protection Bureau or CFPB, an agency with few checks and balances and a mandate to reform lending practices.
Worried that the unchecked power of the agency would spread to other types of traditional lenders like banks and business financing, lenders have banded together to form lending associations to protect their interests, explain their lending policies, respond to complaints and fight unfair regulations in the industry.
Like any professional organization, these associations serve the needs of its members and consumers by advocating for their customers and member businesses. Offering the highest standards of professional integrity and transparency, online lending associations include many specific areas of finance according to AssociationsNow.com2.
Three of the industries that Dissociation represents include the Innovative Lending Platform Association for small businesses, the Coalition for Responsible Business Finance and the Marketplace Lending Association. These organizations join the increasing roster of finance associations that include payday lenders.
Benefits of Online Lenders Alliance for Consumers
Online lending has grown substantially from zero to $37 billion in just a few years according to a Wall Street Journal Report at WSJ.com3. No government agency oversees all the types of loans made online, but the CFPB seems to think that it has a mandate to control every area of finance.
This power-grab concerns every U.S. lender, so many have organized associations to get the facts out, provide responses to industry criticism and inform the public accurately about their products and policies. The payday loan industry is one of the biggest online lenders, so it has particularly embraced the benefits of organizing associations such as the Online Lenders Alliance (OLA). The benefits of these organizations for consumers include:
- These associations can match borrowers and lenders and investors and business owners.
- Customers can learn exactly what terms their loans carry and the consequences of late payments or getting extensions.
- Borrowers can become better educated to make wiser spending and credit decisions.
- People can read the financial industry’s response to political charges, new regulations and legal initiatives.
- Lenders can learn what their responsibilities are to provide transparent, upfront information to borrowers.
Trusting Professional Associations to Reveal the Truth and Respond to Erosion of Borrower Rights
Today’s lending and investment industries offer many loan products that are carefully priced based on supply and demand, administrative costs, degree of default risk and other criteria. Explaining the truth about lending–especially online lending–shows that these lenders are offering legal loans, transparency in their lending practices, tools to compare interest rates and other resources for business members and borrowers.
It’s important to get all the facts before borrowing, and only the companies that offer online loans can explain their business practices and costs intelligently. Newly formed associations such the Online Lenders Alliance are setting the standard for responsible lending and providing a forum to fight government excesses in regulations. You can learn more about the Online Lenders Alliance at PersonalMoneyStore.com.