Case 10: Payday Loans: A Need Product or a Scam?
1. Who are the stakeholders in this case and what are their stakes?
The stakeholders are consumer/borrowers, the payday loan industry, and the regulators, the
2. Have you ever taken out a payday loan or title loan? What was your experience?
I have never taken out a payday or title loan. Payday loans are not common in my state because
3. What is your evaluation of the corporate social responsibility of the payday lending industry,
using the four-part definition of CSR? Is payday lending an exploitive industry that snares
borrowers in a never-ending cycle of debt?
The four components of CSR are (1) economics, (2) legal, (3) ethical, and (4) philanthropic.
While the payday lending industry certainly derives economic benefits to the industry, it doesn’t
seem to do much for society at large. Although consumers may get much-needed infusions of
cash, the terms are bad, the consumers have poor credit, and the likelihood of their being able to
4. Is the industry socially responsible but some of its members are engaging in questionable
practices? What questionable practices are most troublesome?
As noted earlier, one would struggle with considering this industry socially responsible.
However, it is also true that many of its members seem to be engaged in questionable practices.
5. Given the strong need for payday loans on the part of some citizens, should the industry be
further regulated such that borrowers no longer have access? What are borrowers to do who do
not meet the new federal regulations?
Rather than regulate the borrower, perhaps the states should more closely regulate the lenders.
6. Is the title loan industry the same as the payday lending industry? How do they compare?
A title loan is when a loan is taken out on a consumer’s vehicle. It is different from a payday
7. The states have regulated the payday lending industry. Should the federal government be
getting involved with regulating this industry? What will be the effects of the proposed CFPB
regulations?
If the federal government gets involved, it seems likely that the payday loan industry will be
drastically changed. However, the CFPB—charged with ensuring consumer protection and
8. What is your assessment of the Google ban? Does Google have a conflict of interest in
opposing this ban?
Although the Google ban of payday lending ads seemed at first read to be based on the belief that
predatory lending was unethical, given their clear conflict of interest (their parent company’s
9. Should the CFPB back off and let the marketplace and the states handle payday lending
issues?
I believe that there should be consistent standards across the country for managing these very
dangerous loans. Why should consumers’ rights in one state be more important than consumers’
rights in another? I’m not certain that the market always does a great job in “handling”