Wrong tree
Thursday, June 19th, 2008 By Mike Maurer
The Buckeye Institute’s Marc Kilmer has tirelessly documented the poor policy decisions behind the payday lending fiasco. In the end, state legislators performed one of the worst features of government: They attacked an unpopular minority on invalid grounds to appease an unaware majority and score some cheap publicity points. Truly reprehensible stuff.
It raises a wonderful question of communications and understanding, basic epistemology. It’s easy to say “391 percent annual interest rate” and have people be appalled. But to get there you have to count and calculate and readjust. That’s all fine; please do so. Lord knows, business are sticking it to people all the time through such tricks. The more exposure the better.
But you can’t do it to payday lenders and ignore Huntington Bank and all the rest. Some sap who pays $50 to borrow $300 for two weeks really is paying a darned high annual interest rate, if you want to calculate that way. But if he has a Huntington, Chase, 5th/3rd checking account and bounces one, two or three checks, what will his “borrowing” interest rate be then? They won’t give him two weeks to set it right. They’ll close his account. Do fair and comparable math there, and the interest rate will be in the thousands of percent, not hundreds. How’s about that General Assembly? Going to go after Huntington, Chase, 5th/3rd? Didn’t think so.
Nonetheless, for all of that, what are the payday lenders thinking when they say they want to put this on the ballot? What are the odds voters will see to the bottom of the problem? The lenders would be better off putting on a measure that goes after their competition. Nobody likes banks, either.
June 20th, 2008 at 2:55 pm
The Not So Great State of OH’s reasoning is simple: Do anything to hurt poor people especially if that pain does not adversely affect rich people. The government is performing violence on the poor by taking away a perfectly moral and rational mechanism for the poor to manage their finances.
The best part about this is that these Payday Lenders compete directly against those nice banks and credit unions. So a Payday Lenders loss of its best customers is the gain of the banks and credit unions. For example a credit union will give a person a credit card with a $500 limit if that person has the $500 up front. Payday Lenders do not do so.
The worst part is that the poor now must either face those nice banks and credit unions wanting up front money OR they go to underworld alternatives like loan sharks.