Payday lending often ignored by regulators as consumer need.

In comments to the Federal Deposit Insurance Corporation (FDIC) on March 14, 2003, CA criticized draft guidelines by the FDIC that seem to ignore that large numbers of consumers find payday loans useful to them in meeting short-term needs for small amounts of funds. These consumers often don't have less-expensive alternatives, such as unsecured loans from a financial institution or credit cards.

CA urged the FDIC to consider the unintended consequences to some consumers of further restrictions on payday loans.

There is indeed a risk to payday borrowers of overextension of credit and higher payments for those loans. But there are also risks that, if faced with restrictions on their ability to access that type of credit, some borrowers may have to pledge a needed household good to a pawnbroker or face possible bankruptcy. In the absence of payday lenders, some borrowers would be forced to deal with illegal lenders that provide no consumer protection.

In its comments CA concluded that payday loans are needed credit for many borrowers, as the increasing demand for that type of credit shows. The firms providing such services are already regulated at the state and federal level and are subject to consumer protection statutes and regulations. Federal regulators should avoid the temptation to substitute their own judgement about the appropriateness of payday loans for borrowers. That decision should be made by the borrower and the lender in mutual agreement.