Jamie Frauenberg -- Senior VP of Checksmart and President of the Ohio Association of Financial Service Centers -- explained whya  pay day advance gets such a bum wrap in her home state of Ohio. "The scrutiny from lawmakers comes from reading misleading media coverage and listening to the anecdotes and fact-free information from so-called consumer advocates who have not taken the time to learn about the customers or the service," she said. "They've likely never stepped foot in a store or been in a position to need a small amount of cash between pay cheques. It's easy for people who have nothing to lose to call for a ban."

She adds, "Customers use a pay advance to avoid other fees or less desirable alternatives. They choose between bouncing a cheque or overdraft protection, incurring late fees on routine bill payments, borrowing from friends, family or church, taking out a cash advance on a credit card, using an online lender or taking out a pay day advance. All of these products have a cost associated with them. Elimintating a pay advance just forces people to choose alternatives they had previously tried to avoid."

Georgia and North Carolina eliminated the pay day advance in May 2004 and December 2005 respectively. The aftermath studies were shocking. In Atlanta, depositors paid an additional $36 million per year in bounced cheque fees following the ban. Debt collector complaints rose over a third and Chapter 7 bankruptcy filings increased by 8.5%. A November 2007 study by the University of North Carolina Center for Community Capital found 10% of those who didn't pay a bill or paid late had utilities disconnected, went without a prescription and suffered damaged credit ratings. Fifty percent of those who did not pay or paid late incurred late fees, had bills fall into collection, faced repossession or had to file for bankruptcy. Most people borrowed for a medical expense, car repairs, reduced work hours, a job loss or unexpected child expenses.

A pay advance is a much-needed option for people who are experiencing short-term unanticipated hardships. The best use for a pay day advance is for a one-time medical or car repair bill, rather than to pay off other loans or credit bills. With proper education, consumers can enjoy the benefits of a pay advance as a way of preventing a downward spiral of debt.