Earlier this year, the House Subcommittee on Financial Institutions and Consumer Credit held a hearing to discuss H.R. 1214, (othewise known as the "Payday Loan Reform Act of 2009"). As typical in such a hearing, several interested parties were invited to provide testimony.

In the hearing, Barbara Fox testified on behalf of the Consumer Federation of America, and Troy McCullen testified on behalf of Finance America of Louisiana (a large payday lender in Louisiana). What is interesting (at least to us) was the testimony of an individual (Ms. Gerri Guzman) from California. Ms Guzman is a teacher, and she has had to resort to payday loans in the past.

Here's an excerpt from her testimony.

Personally, I consider payday loans to be a necessary evil. If I had the choice, I would never have been in a situation wehre I needed a payday loan. I'm sure this rings true for the tens of milions of other payday lending customers around the country. In a perfect world, we would all have money set aside in savings to deal with expenses as they come up. Unexpected, but unavoidable expenses, such as a broken down car, a medical bill, or a child's college application form.

But having much money in savings is not the reality for many families, especially with the economy the way it is today.

I first became a payday lending customer when I decided to leave my job to become my Mother's primary caretaker for the 14 months prior to her passing. I do not regret for a moment my decision but I would be lying if I said it didn't create a temporary financial hardship.

At the time, my options were to take out a payday loan or not to replace a water heater.

I was aware of the cost of the payday loan and decided that it was the best option for me at the time. No, they are not cheap, but they can be the least expensive, or only choice.

Ms. Guzman's views match that of many payday borrowers. While we don't want to pay outrageous fees, we do want reliable and prompt access to funds in the event of emergencies.

You can read a transcript of her whole testimony here.

Tagged as: payday loans, payday reform