online cash advance
Not as profitable as critics think
Stoianovici and Maloney continue on by citing more from Huckstep’s study. Specifically, he compares the profitability of online cash advance stores versus large commercial lenders and the retail giant Starbucks (which has a similar business model to short-term lenders). Analyzing profit margin, Huckstep finds thatpayday lenders make less (7.63 percent) than both the commercial lenders (13.04 percent) and Starbucks (nine percent).
So how can it be argued that online cash advances are predatory? According to Donald Morgan of the Federal Reserve, there is no logical argument that fits. Morgan does not find evidence that the presence of online cash advance stores damages the financial well-being of consumers; default rates remain low. Stoianovici and Maloney clearly agree that this does not suggest that predatory lending is taking place.
Online cash advances – the consumer’s choice
Authors Stoianovici and Maloney find no empirical evidence that online cash advances lead to an increase in bankruptcy filings. The loans do not perpetuate a “cycle of debt.” Admittedly, despite full disclosure of terms and counseling available to customers before signing online cash advance agreements, some will borrow beyond their means. This does result in higher finance charges, but this is an uncommon symptom of bad spending habits, not a factor that is inherent in the online cash advance industry. It is clear that over-regulation that causes lenders to shut their doors not only puts people out of work, but harms the financial well-being of consumers. These consumers typically look to sources like checking overdraft to protect them when financial emergencies threaten their budget, yet it is unfortunate that this exceedingly profitable device is not in their best interests. Banks profit, consumers lose.
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online cash advance