Payday Loan Solutions: Slaying The Hydra By Benjamin D: Article Analysis

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Faller, Benjamin D. “Payday Loan Solutions: Slaying the Hydra (and Keeping it dead.) (Cover Story).” Case Western Reserve Law Review 59.1 (2008): 125-160. Academic Search Complete. Web. 1 Apr.2015.
In the Article “Payday Loan Solutions: Slaying the Hydra (and keeping it dead,) (Cover Story,)” Benjamin D. Faller begins his article by giving a different back-story as to how payday lending or is critiqued. Faller writes his article to focus on the “larger scale” (126) of payday lending because he feels like it affects the nation as a whole and not just one individual. Faller begins to talk about how an individual can become caught up in the payday loaning debt trap. For example, Faller uses his sense of authority to say that “The payday lending
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Martin also talks about how some states failed to institute payday loan regulations. Martin states that because “these legislative efforts frequently fail because crafty lenders quickly adapt to new legislation by finding loopholes that undermine any consumer protection provided by the new regulatory laws” (855). Martin includes a quote in the article that stand out a lot coming Dan Feehan, the CEO of payday lender Cash American has said that “the theory in the business is you‘ve got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that‘s really where the profit is” ( 571). Martin also talks about how the payday loan companies lure individuals back into taking out another law by stating “since loans to repeat customers are cheaper to administer, lenders do what they can to encourage repeat borrowing, including calling customers as soon as a loan is paid back and offering them even more money” (574). Martin also points out that “Study data show that people generally return to the original lender unless they have had a bad experience with a particular lender or, as the saying goes, need to ―borrow from Peter to pay Paul” …show more content…
Skiba argues that “any regulations that constrain payday borrowing beyond restrictions on rollovers/renewals are suspect because they remove or inhibit the use of a tool that low-income people use to smooth their income stream[,] this is something higher-income people rarely need because they typically have more buffers—savings accounts, regular credit cards against unexpected shocks” (1029). Skiba has statistical data that shows that the regulation of rollovers is very necessary. Skiba claims that “our analysis shows that within the first year of borrowing, the average individual takes out 5.48 more payday loans than a similar consumer who applied for but was ineligible to borrow on payday loans. This translates into $1,841 of payday loan debt over a one-year horizon, and $2,023 over two years, significant at the 1% level.2 Given these facts, curbing rollovers is a sensible tack for payday loan regulation”

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