National Cash Advance recently surrendered its payday lending licences. Follow the link for the full story.

Here is an older, but still relevant article titled In Defense of Payday Lending by Tom Lehman, Professor of Economics at Indiana Wesleyan University.  In this article published in The Free Market originally Mr. Lehman makes a compelling case that payday loans are “creative extensions of credit” to households who may otherwise not have access to credit, and that the typical allegations against the payday lending industry are “largely without merit”.

This study by Deloitte, one of Canada’s largest accounting firms, is the one of the most representative studies ever completed on the cost of providing payday loans in a Canadian province. The results were particularly pertinent in BC because of how its provincial government searched for an appropriate rate cap. In a payday loan consultation document, the BC government defined its objective for a maximum allowable rate as “the lowest charge possible that still allows a viable payday lending market.” It seems that Deloitte provides the answer in this study.

This study suggests that “stricter regulation coupled with standard and improved disclosures for consumers will increase competition within the alternative financial sector.” An interesting deduction from the report is how the relationship between disclosure and competition is portrayed. The point made in the report suggests that better rate disclosure leads to easier comparisons by consumers for prices between lenders, which in turn lead to increased price competition. That seems logical to me.

This article includes many interesting aspects, however there are two I want to touch on specifically. First, it is rare that a mainstream bank or credit union, like Kinecta, would venture into an alternative financial service, such as that offered by Nix. Secondly, the trends of bank and credit card fees mentioned in the article are staggering. All in all, this article is a very good read. Enjoy.

Although this isn’t a payday loan topic, it is still worth sharing. A Vancouver Sun columnist was taken to court by Money Mart using a little-known Bills and Exchange Act violation. It seems that even if you put a stop-payment on a cheque which is later cashed at cheque casher, you, the cheque writer, are still liable for the amount on the cheque:
Before writing another cheque, you may want to become familiar with this obscure law

This cartoon, from Check Into Cash via Payday Pundit, looks at why using APR (a measure of annual interest) to calculate the true cost of a payday loan makes no sense (click the image for a larger view):

A new study released by Dartmouth College Prof. Jonathan Zinman last week examined the effect of a ban on payday loans on Oregon households. Similar to the 2007 report, Payday Holiday, by the New York Federal Reserve, this study confirms that households in states with a payday lending ban fare worse than where payday loans are allowable.

The study states that borrowers have no choice but to choose “inferior substitutes” in the absence of payday loans, and that “restricting access (to payday loan credit) caused deterioration in the overall financial condition of the Oregon households.”

This short summary of an interesting analysis provides a comparison between the costs of payday loans and bank overdraft charges. Researchers from the Department of Economics, at East Carolina University, conducted this study. The two are directly compared by considering overdraft protection as a type of short-term loan. The findings are very interesting.