The community group National People’s Action and the watchdog group Public Accountability Initiative, released a report in which they show how big banks finance the payday loan industry. Some of the banks involved are Wells Fargo & Co. and Bank of America Corp. Although payday loans may be useful in the right circumstances, it sometimes worsens the situation of the person asking for the loan. This is because the person becomes unable to pay the loan and the interest accumulates exponentially.
The report includes:
• “Diagrams illustrating ties between Wall Street executives and payday lenders”
• “A table that lists recipients of Troubled Asset-Relief Program cash that have provided financing to payday lenders.”
• “Notes on how the payday loan companies depend heavily on credit agreements and other financing vehicles from banks”
The question then arises, is it ethical to empower the payday loan industry knowing that it potentially worsens people’s lives?
Wells Fargo spokesman Gabriel Boehmer responded to this ethical dilemma as follows:
“Every responsible business that complies with the law has equal access to consideration for credit”, “That said, we exercise strict due diligence with these customers to ensure they, like us, do business in a responsible way.”.
Steven Schlein, a spokesman for payday lenders group Community Financial Services Association responded as follows:
“Payday loans companies are in fact good creditors because their customers are good creditors”
He added that 95% of payday loans are repaid.
So which is the bottom line? One could argue that it is circumstantial. Giving a loan to a single mom is different from giving it a person with gambling problem. However, the question is out for debate and it is up for the people to decide for themselves.
Very interesting article. But don't forget to cite your sources.
ReplyDelete