Legislators Changing the Rules for Payday Lenders
States come up with their own payday loan rules and by all accounts, stricter rules are leading to fewer bricks and mortar lenders in the market, opening things up for online payday loans. The reality remains that in this economy (or any for that matter), more regulation does not mean deterring would-be customers, it just means that the potential customers are going to go elsewhere for what they need.
Legislators in Washington are looking for a legislative do-over for exactly that reason.
Via the Tacoma News Tribune:
House Bill 1678 would repeal a year-old rule that prevents people from taking out more than eight payday loans in 12 months, a move the bill’s sponsor, Rep. Steve Kirby, says is necessary to prevent flight to riskier Internet loans. But anti-poverty advocates say the bill would leave borrowers unprotected.
“The evidence would seem to indicate that consumers are seeking higher cost, unregulated products,” said Kirby, a Tacoma Democrat. He said the eight-loan cap was sending customers into “the wild west,” a world of unlicensed Internet loans where fees are higher and credit limits don’t exist.
While quick payday loans may be a more viable option for some, “the wild west” holds some appeal to those desperate to cover unforeseen expenses, bills or interest payments on previous loans.
The argument has even invoked the name of Jesus in Mississippi, where payday loans have been allowed since 1998 and could be outlawed in 2012 when current law is due to expire.
In Missouri, the 2011 Payday Lender General Assembly report recently revealed that the state has issued 19% fewer payday lender licenses and existing lenders are issuing fewer loans. On the other side of that, however, the typical interest rate on loans being made runs about 445% APR. As all adults borrowing money from payday lenders should know, no one said easy access to emergency money would be cheap and no one should expect that government interference in the market would make that money any cheaper.
With a real U.S. unemployment rate of 23% or higher, why on Earth would we impede access to emergency money, even if that money comes at a high cost to the borrower? Surely there are better cluck missions for our legislators to go on for now.