BuckeyeBlog

Cleveland Plain Dealer columnist Sheryl Harris noted in yesterday’s paper that payday lenders are still operating in Ohio, even though the practice was ostensibly banned by lawmakers last year. These lenders are technically in compliance with the law and are still offering loans to people who want them. It’s the market at work — people who want to borrow money will find people to loan it to them. There is nothing wrong with that, regardless of how many laws are passed to ban it.

Of course, the law passed by Ohio politicians seems to have hurt borrowers. As the story noted:

First American customer David Spencer complained to the attorney general that, where he used to pay $75 for a $500 loan, First American charged him a total of $90 to borrow the same amount after the law changed.

The law was enacted in the name of helping consumers. Consumers of payday lenders didn’t need or want the paternalistic law, however. If they were upset with these loans they would have stopped using them. The continued popularity of modified payday lending in Ohio illustrates that politicians aren’t in touch with the needs of those who use these lenders. In fact, the legislative action against lenders made the situation worse for the consumers they were supposedly protecting. Chalk this up as yet another example of politicians’ interference producing the opposite result of what was intended.

Tags: paternalism, payday lending

This entry was posted on Tuesday, February 17th, 2009 at 5:46 pm and is filed under Economic Freedom. 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.