| day lending is a controversial practice and faces both | | | | observed,Payday lending services extend small |
| legal battles and public perception challenges in nearly | | | | amounts of uncollateralized credit to high-risk |
| every place where it is practiced. An early day motion | | | | borrowers, and provide loans to poor households |
| criticizing the payday lending market for high APRs | | | | when other financial institutions will not. Throughout the |
| and for locking customers into a "cycle of credit | | | | past decade, this "democratization of credit" has made |
| dependency"; it also noted the growth of Dollar | | | | small loans available to mass sectors of the population, |
| Financial, a US-based payday lending company trading | | | | and particularly the poor, that would not have had |
| as Moneyshop in the UK, and called for a public inquiry | | | | access to credit of any kind in the past. |
| into the growth of high cost lending in general and | | | | These allegations against the payday-lending industry |
| payday lending in particular. | | | | are largely without merit, and generally reflect the |
| Exploiting Financial Hardship for Profit | | | | views of "do-gooder" anticapitalist elites who abhor the |
| Critics[who?] blame payday lenders for exploiting | | | | "messy" and unplanned outcomes in low-income |
| people's financial hardship for profit. They say lenders | | | | consumer finance markets. Rather than seeing payday |
| target the young and the poor, particularly those near | | | | lending practices as a creative extension of credit to |
| military bases and in low-income communities. They | | | | poor households who may otherwise be without loans, |
| also say that borrowers may not understand that the | | | | these critics see it as yet another opportunity for |
| high interest rates are likely to trap them in a | | | | government intervention in the name of "helping" the |
| "debt-cycle," where they have to repeatedly renew | | | | poor. |
| the loan and pay associated fees every two weeks | | | | Aggressive collection practices |
| until they can finally save enough to pay off the | | | | In US law, a payday lender can use only the same |
| principal and get out of debt. Critics also say that | | | | industry standard collection practices used to collect |
| payday lending unfairly disadvantages the poor, | | | | other debts. |
| compared to the middle class who pay at most 25% | | | | In many cases, the borrower has written a post-dated |
| or so on their credit cards. | | | | check to the lender; if the borrower defaults, then this |
| However, opponents of government regulation of | | | | check will bounce. Some payday lenders have |
| payday loan businesses argue that some individuals | | | | therefore threatened delinquent borrowers with criminal |
| that require the use of payday loans have already | | | | prosecution, for check fraud[23]. This practice is illegal |
| exhausted or ruined any other alternatives. One | | | | in many jurisdictions. |
| advocate of unfettered payday lending | | | | |