I've just read two very damning articles sent to me by a reader of this blog about Payday Lenders. The 1^st article from the Dallas Morning News, involving the local government of Mesquite, Texas's decision to minimize the number of Payday lenders within 1,000 feet of a similar business, and each must be in a freestanding building at least 200 feet from residential areas and 500 feet from freeways, a month after Richardson, Texas imposed similar restrictions due to some of the lengths that predatory lenders will go to generate revenue.

The ordinance the council adopted Feb. 18 requires payday lenders, check-cashing locations and title loan companies, which make loans backed by borrowers' car titles, to obtain a permit before they can begin operating.

The 2^nd  article from the Wall Street Journal taking place in Dothan, Alabama where lenders have been making high-interest loans, secured by paychecks, and increasingly targeting recipients of Social Security and other government benefits, including disability and veteran's benefits.

The law bars the government from sending a recipient's benefits directly to lenders, so the lenders have worked out relationships with banks to deposit the funds and then send the entire amount to the lender, where lender then subtracts debt repayments, fees and interest, before giving the recipients the residual, thereby making the individual even more reliant on the lender for future funds.

It appears although industry groups, such as the Center for Financial Services Innovation (CFSI), which I have not always been supportive of, The FDIC, and a number of banks are attempting to educate the consumers a group of unscrupulous lenders still go after those in our country more susceptible to these types of tactics, or those individuals in dire straits making an impulse decision that ultimately creates a self fulfilling prophecy where the more availability you have to these types of lenders, the more you use them.

There are a couple of schools of thought that come to mind, the most pronounced, is the legal argument "buyer beware", where the onus of your actions are directly attribute to how you involve yourself in these types of endeavors, and the other, that government should not regulate business. Both are valid, but there comes a point in time that you have to educate the consumer, and if education does not stop abuses of this nature, then legislation should dictate acceptable use policies.

Case in point, if a bar serves a customer alcohol, then the customer becomes unruly, and gets in an accident after imbibing, then the bar is at fault because they were in a position to intercede on behalf of the drunken customer. Likewise, if those in our community do not have the education to understand an impact a 400% payday loan will have on their household finances, as well as budgets, then there needs to be an action that should assist those individuals from harming others in their family through poverty because of an uninformed decision made in a financial panic.

I have been in a business that supported the underserved or unbanked communities through our kiosk program. We were in a position to electronically process payments, charge fees, and dispense pre-paid cards that in turn could be enabled with small lines of credit. Like a number of reputable companies in the Alternate Financial Services business, our fees were reasonable, and our service was widely herald as beneficial to the community.

Without some sort of regulations, preferably by those groups that have nothing to gain, we can bring respect back to a service that under the right circumstances has merit.