BuckeyeBlog

In an effort to capitalize on the news surrounding housing issues, anti-payday loan folks are trying to blame these loans for foreclosures. There is no evidence to support the notion that “more people are turning to short-term loans with sky-high interest rates just to get by,” though.

Unfortunately, the biased reporter responsible for this piece fails to let the fact that “figures are hard to come by” dissuade him from quoting a variety of biased “experts” to support his unfounded thesis. Of course, these “experts” fail to educate the reporter on basic facts, such as that the interest rate on these loans (in Ohio at least) is 15%, not 800% as he claims.

The story also unintentionally illustrates the fact that these loans aren’t causing problems for lenders. People who are having financial problems turn to these loans, but to think that eliminating them will solve borrowers’ problems is ridiculous. For instance, it talks about a woman who took a payday loan because she couldn’t afford her mortgage payment. She could not repay the loan (and an anti-loan lawyer advised her not to pay it — apparently that lawyer thinks that people should be able to break contracts whenever it suits them) and eventually had to sell her house. The fact that she had to sell her house was that she could not afford the mortgage, though. The payday loan did not cause this situation. Even without taking a payday loan this woman would have still been faced with a mortgage she could not afford.

But all this is lost on those who have a desire to tell other people how to live their lives. As one paternalistic professor puts it, payday loans are like ”‘handing a suicidal person a noose’ because many people can’t control their finances and end up mired in debt.” Yes, people are too stupid to run their own lives so they need wise professors telling them how to do it, right?

Unfortunately, this news story is all too typical of most on payday lending. They turn to left-wing experts who look down on the financial choices of others and ignore academic studies that actually discuss the realities of payday lending (see my report which discusses these studies here). Inaccurate information, politically-motivated propaganda, and misleading sob stories are par for the course. It’s too bad that some legislators react to this misleading “journalism” instead of the true facts about payday lenders and borrowers.

Tags: Regulation

This entry was posted on Wednesday, March 26th, 2008 at 1:21 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.