Predatory payday loan companies harm borrowers, economy

by J Scott Christianson, Columbia Daily Tribune Columnist

Last year’s Nobel Peace Prize was awarded to Muhammad Yunus, a U.S.-trained economist who established a bank in his native India to lend small amounts of money to the poorest people in the world. These micro-loans allowed people to raise themselves out of poverty, establish a good credit rating and develop thousands of small, sustainable businesses.

In areas where micro-loan programs have been established, the local economy has benefited from the increased economic activity and decreased poverty. Today Yunus’ micro-loan program is being replicated around the world.

Contrast Yunus’ loan program with the loan operations run by “payday loan” companies. Both loan to the working poor, but the 1,500 or so loan operations run in Missouri by businesses such as Quick Cash and Advance America are not trying to help people out of poverty but instead keep them in a continual state of financial distress.

Often charging as much as 400 to 500 percent interest, these companies prey on the poorest people in our community — people who have no good options for short-term financing. Many are able to pay off these outrageous loans, but many can never get out of the cycle of debt once they enter, and the payday loan companies make more and more money as their customers get further and further in debt. It is like trying to dig out of quicksand; you are just never going to get ahead of the game.