We must ask Why? five times to get to the root cause of a problem.
I was in the right place at the right time in 1985. I was the newly hired controller of a Motorola manufacturing plant. The company’s corporate leadership defined Six Sigma quality as our 5-year goal.
To put that goal in perspective, my factory averaged 16 defects per radio, most caught during testing before shipment. Our new Six Sigma goal was 3.4 defects per one million radios. At the time, the goal seemed unachievable. But it was achieved, using new methods to identify and eliminate the root causes of errors and problems. One of those methods was The 5 Whys.
On June 2, 2016, the U.S. federal government issued 1,600 pages of new regulations for the payday loan industry. I do not believe 16 pages, much less 1,600, gets to the root cause of why millions of Americans need a $350.00 loan to repair a car or pay the electric bill.
As a nation, we would be better served to ask Why five times to identify the root cause of payday loans and then a solution.
5 Whys for Payday Loans
Q1: Why do millions of Americans need a $350 loan until payday?
A1: They have an emergency car repair or need to pay the electric bill before a late fee is charged.
Q2: Why do they have to borrow the $350.00?
A2: Because they don’t have any savings or family member or friend who can loan or give them the $350.
Q3: Why don’t they have any savings or person who can loan or give them the money?
A3: Because monthly expenses exceed income for themselves, their family and friends. And they don’t know of anybody who would give them the money.
Q4: Why don’t they know of anyone who would give them the money instead of loan it?
A4: Because they limit their search to only people they know.
Q5: Who should the person needing $350 know that they don’t?
A5: Most churches have benevolence funds to help members with one-time monetary gifts, not loans. Plus, most churches, offer free financial counseling and/or household financial training, such as Financial Peace University. Learning how to spend less than you make and earning extra income is the solution that eliminates payday loans.
The solution to payday loans is not legislation, it’s joining a church.