I generally subscribe to the ‘grocery store rule’ when it comes to social and political issues. I know an issue is ‘trending’ in our collective consciousness when I hear people talking about it at the grocery store. The grocery store is like Buzzfeed for adults.
Normally in Alabama, even in February, most checkout-line conversations revolve around college football or the occasional threat of a quarter-inch of snow. But a few weeks ago, the man and woman standing behind me in line were discussing the evils of short-term, small dollar lending. Over the past few years, I have heard the same conversation, more-or-less, at the dentist, the health club, coffee shop and several other places.
As a consumer finance attorney who represents traditional installment lenders, I always want to chime in, but I rarely do. It is not that I am unwilling to defend my clients. To the contrary, notwithstanding my professional ties to the industry, I really believe in the loans installment lenders provide. However, I have found that most people mean well and have good intentions but do not want to fully understand the nuances of the issue. It is easier to talk in snippets and make generalizations.
For that reason, when I cannot bite my tongue and I do engage, I try to present the industry’s side in just five sentences. So, in today’s post, I share the case for traditional installment lenders in five sentences:
Installment loans are fixed-rate, fully-amortizing loans that are intended to be repaid in equal monthly installments, and unlike some other non-bank loan products, lenders underwrite these loans based on the borrower’s ability to repay.
The consumer finance industry provides quick access to capital to a segment of the population that may have no other reliable source of money, such as someone who needs $800 for vehicle repairs to get to work.
Installment lenders are subject to a significant number of federal and state laws, rules and regulations and are under the jurisdiction of state banking departments or similar agencies for supervision and examination.
Annual Percentage Rate (APR) can be a deceiving number because it is expressed as an annualized rate and does not always reflect the cost of making the loan.
Many installment lenders order credit reports and report to credit bureaus giving consumers the opportunity to build and improve credit history.
I never really expect to change someone’s mind in five sentences, but I do think it helps people understand that there are two sides to every coin.
Consumer finance companies, pay attention. The debate has made its way into the grocery store.