Major Banks Finance Payday Lenders

Javi Calderon

Major Banks Finance Payday Lenders

The fact that the major banks in the U.S. finance payday lenders should come of no surprise. These institutions did not achieve their success by following a moral compass; they are led by practical, cold-blooded calculations, dollars and cents.

Critics of the payday loan industry have been calling for the big banks to cut ties with payday loan lenders. An organized protest was even held in Iowa to protest Wells Fargo, who finances 1/3rd of the entire payday loan industry. Though critics may disagree with some of the negative possibilities of payday loan lending, the relationship with big banks is something both the banks and our country need.

The relationship between big banks and the payday loan industry makes perfect sense given our current economic situation. With the housing market struggling and the ramifications of the credit crisis still fresh on our minds, the banks need new, reliable revenue streams.

The payday loan industry grew as a response to the recession. As unemployment rose, and the banks began to struggle, people turned to short-term cash advance loans for money. Now, as a thriving and steady industry, payday loan lenders provide the big banks with consistent income. The money from payday lenders is a stabilizing factor that has helped the big banks get back on their feet while their other sources of income are still floundering.

Without a stable banking system we will not have a stable economy. It’s that simple. The banks and lending markets are the backbone of our economy, and the only way lending markets and housing markets will recover is if the banks are able to lend money out.

With the banks tightening their grip on loans a fast payday loan might be the only option for someone stuck in an unexpected financial bind. Eliminating payday loans, or cutting funding for the industry, would certainly result in some unfortunate people having to choose between sudden medical expenses and food or the electricity bill. People who live paycheck-to-paycheck and have poor credit need somewhere to turn in times of crisis. Payday loans serve a vital role in our society, and though perhaps the system needs tweaks and checks, it is a service that is in demand and therefore should be provided.