The main reason why big finance hates small payday loan companies is that they view them has having an unfair advantage in competition because payday loan companies are allowed to charge extremely high APR interest rates.
Of course, one of the obvious reasons for big financial institutions to take on short-term lenders is that of competition. If people get a short-term loan then they won’t get a bigger long-term loan at the big banks — competition.
Of course, the APR rates of long-term rates and short-term rates are extremely different, much like the difference between the rates of pay for hotel rooms and actually renting an apartment. Hotels are expensive over a year because they are only created for short-term rents.
If they are capped at 36%, or limited by the amount of money they can loan out, they will not be able to stay in business. This creates a problem for consumers, because financial institutions do not make small, short term loans.
One of the main reason these big companies don’t try to market short-term loans is because they spend to much to work on a loan to make it profitable. Making $50 per loan isn’t enough to cover the costs of the paperwork for the big guys.
The interesting fact, however, is that a few large financial institutions fund most of the small short term lenders. They get a profit on the side, so to speak, because they are enabling the short term lenders to stay in business by lending them millions of dollars for payday loans.
The big guys are going to be rolling in the dough regardless of what happens, and they need the small companies. That might be another reason they are conflicting: the big guy needs the little short-term loan lender, which might be an ego thing.
People sometimes need to get money fast. If they can’t get short-term loans, they might have to use credit cards or long-term loans… especially if short-term loans are outlawed. That’s the whole point, in the end.
They might be able to try out a way to make money online or sell products, but there will soon be legislation outlawing that as well. This is really going to affect lower-class Americans.
Of course, some people might need short-term loans that the big banks will be forced to offer them — but that probably won’t occur.
Big finance hates watching small payday loan companies grow and thrive. In some places, there are more payday loan stores than McDonalds and Starbucks.