Without a doubt, payday lenders have stories they'd be glad to tell you that would warm your heart.
A typical scenario might involve a single mother with two children, who'd just cashed her check but then lost her wallet with the rent money in it. A payday lender allowed her to borrow the money, the rent got paid, a child support check arrived a day later, the borrowed money was paid back, and everyone lived happily ever after.
The problem is, those stories are the exception rather than the rule with payday lenders, cash advance stores and title pawn businesses.
Only 16 percent of borrowers at such places use the loans for emergencies, according to a survey by the Pew Charitable Trust Fund. Nearly 70 percent use them for basic expenses -- rent, groceries, prescriptions, car payment -- all of which are owed again the next month.
Borrowers who use the loans for basic expenses then fall into a vicious cycle of either rolling over their loans, having more fees added or taking out a new loan. The Consumer Financial Protection Bureau found that borrowers took out a median of 10 loans -- which can have interest rates exceeding 300 percent -- over a 12-month period.
At the end of one year, they're staring from a deep well at a mountain of debt that began with one relatively small loan.
The consumer bureau gets it, and city mayors like Chattanooga's Andy Berke, who must deal with the proliferation of such businesses, get it.
The problem is, the people the industry more often hurts are also the people it sometimes helps. The median income of payday loan borrowers, according to an analysis of some 15 million payday loans by the consumer bureau, is just over $22,400 a year. According to 2015 United States Department of Health & Human guidelines, that amount is below poverty level for a family of four.
If such a source of emergency cash is removed, what choices will the economically challenged, who have no savings and can't qualify for a bank loan, have? Legitimate arguments can be made about the difference between spending on necessities and spending on desires, but that doesn't move the needle on the payday lending problem.
Thus, the national consumer bureau has to walk a tightrope in preserving a measure of credit for consumers -- 6 percent of Tennesseans in a 2012 survey -- while trying to keep the most vulnerable from falling into a hole from which they may never emerge.
Under consideration from the consumer bureau are rules that could limit the number of times a lender could roll over a borrower's loan, limit the number of times a lender can access a borrower's checking account, tighten the rules when a borrower seeks a second loan within a certain time period before paying a first, and require an off-ramp for paying the debt.
The bureau also has to contend with the $46 billion payday loan industry, whose operators across the country, when faced with tightening regulations, simply change the type of loans they offer.
The challenges for Berke, who is bound by state rather than local regulations on the practices of lenders, are different. Though unable to change the practices, he and officials in other Tennessee cities can protect neighborhoods from the concentration of such lenders through zoning ordinances.
He says he has gotten an earful from business owners who believe the presence of such lenders drives down interest in their adjacent businesses, makes them less desirous of further investing in their own property and even, according to a George Washington University and California State University study, makes the areas magnets for crime.
To remedy that, the Chattanooga City Council is expected to vote Tuesday on an ordinance that would keep payday lenders and similar businesses from operating within 500 feet of residential areas or within a quarter mile of other similar lenders.
It grandfathers in the already established lenders, who otherwise would be in violation of the pending ordinance, but it's certainly a reasonable and needed measure the city can take in trying to stop the proliferation of these businesses that take advantage of people -- especially economically challenged people -- in their time of need. We heartily endorse its passage.
It also will be interesting to see what the Consumer Financial Protection Bureau decides for the industry as a whole. Federal regulations on many industries slow economic growth and are an overall minus to businesses, but payday lending is an area that cries for sensible solutions that protect both credit availability and consumers.