Gov. Steve Sisolak appeared at a forum put on by the Nevada Independent last week, which the Indy has now helpfully transcribed (so get your control f on, if you like). And in that transcript, we find Sisolak, saying this, about payday lenders:
“Some people can use payday loans responsibly, other people can’t use payday loans, whether that’s the government’s place to interfere or intervene in that, I’m not totally sure. I’m happy to listen to both sides. But it’s a need. A lot of people in Nevada do not have bank accounts. A lot more don’t have them than you realize don’t have them and sometimes people need to access money and they can’t get it from a bank and I don’t know what’s the alternative frankly.”
The Center for Responsible Lending does. Know what’s the alternative frankly, that is. I explained some of what the group has to say about the subject in a September commentary politely headlined “Nevada can, and should, outlaw this industry.” Yes, you should read the whole thing if you didn’t/haven’t. But here’s part about the matter at hand:
“The experiences of borrowers in payday-free states show that eliminating the payday debt trap does not force consumers to use products that cause greater harm than payday loans,” the Center for Responsible Lending (CRL) said last year in a compilation of research by academics and state governments.
The preponderance of that research finds that the departure of payday lenders had no significant impact on the availability of credit. People turned to multiple alternatives, including mainstream products such as banks and credit cards, but also pawn shops, traditional installment loans, extended payment plans, and a growing number of employer-based alternative loan programs.
What people are not doing is turning from one devil to the next: In states that have ousted predatory, high-fee payday loans, 95 percent of “would-be borrowers” told researchers they would not use payday loans in any form, including online.
The most popular alternative to payday loans? Cutting back expenses to make ends meet.
The Center also reports that the typical annualized percentage interest on a payday loan in Nevada is 652 percent. (Yes. Six hundred and fifty-two. I make typos sometimes but that isn’t one of them). The rate is higher in only four other states.
You may have noticed CPR’s use of the phrase “payday-free states.” Nearly 20 states have capped rates to prohibit the industry from gouging people (with, say, a 652 percent APR) who are already financially strapped.
Capping rates doesn’t end the broader systemic problems or correct the market failures that prey on working people and drive them to places like payday lenders in the first place. Some of that predation is carried out by mainstream financial services — big bank fees and penalties that disproportionately hit people who can least afford them. So if Sisolak and legislators would like to facilitate the establishment of fair, affordable and accessible financial services in Nevada — an “alternative frankly” — that would be a fine thing. After all, as Sisolak notes, “a lot of people in Nevada do not have bank accounts.”
In the meantime, experience in other states shows that people do in fact find alternatives to payday lenders. And whatever their shortcomings, as the CRL report put it, those alternatives “are still less harmful than payday borrowing.”