Please Act Responsibly Most of the Time
Coming to a screen near you: The payday lending industry asks you not to borrow so much money from them.
The industry's lead trade group, a.k.a. the Community Financial Services Association of America, yesterday debuted a $10 million national advertising campaign to better educate consumers about when--and when not--to take out a payday loan.
In the ad: Images of average Joes and Janes going about their daily lives flash across the screen. CFSA president Darrin Andersen says: "We want you to always to use payday advances responsibly. Payday advances are never designed to be a long-term financial solution. It is one way to deal with unplanned short-term expenses. Please borrow only what you feel comfortable paying back when its due."
What led to this somewhat bizarre ad? Officials in several states are considering new restrictions on payday lenders. The industry is trying to head them off with its own attempt at self-regulation. In addition to the ads, CFSA members promise to give strapped customers the chance at least once a year to extend their loans at no extra cost as sort of an escape hatch from debt.
Consumer groups, not surprisingly, don't think much of this, since they don't think payday loans are ever a good idea for consumers. And because they contend the industry relies on repeat borrowers--people who take out five or more payday loans a year--a one-time get-out-of-jail card isn't going to do many payday lending customers much good.
Being a superficial child of television, I'm more fascinated by the ad. It's analogous to Captain Morgan telling you to "drink responsibly," while showing average people not-so-secretly harboring fresh memories of wild, rum-filled hi-jinks as they go about their humdrum daily lives.
(A true equivalent would show people spending their payday loan fixing their transmission or paying their gas bill--but that's more depressing than the image of a boy with a broken arm in a hospital room.)
The message is still the same, though: You can use our product and not get hurt, but if you do get in trouble, dear consumer, it's on you, and not on us.
In other words: "Don't say we didn't try to warn you."
When I talked to Andersen about the campaign yesterday, he explained the industry is just trying to clear up a little misunderstanding.
"Some of our customers didn't understand the intent of our product. It's not a long-term financial solution," he said. "There is a right time and a wrong time to use our product."
He may have a point there. But you've got to wonder whether his industry would be as profitable if people made the right decisions all the time. In that sense, payday lenders are a lot like credit card companies and banks. If consumers were always without sin--i.e., paid off their balance every month, never overdrew their account, walked the extra two blocks in blinding snow to use their bank's ATM, etc.--they'd have to find another way to boost profits besides through fees.
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