Payday Pundit

When I read this article in the University of Utah’s student newspaper I had exactly the sentiments expressed by a reader in the comment below:

I fail to see the logic behind Mr. [Aaron] Shaddy’s article. $300 payday loans causing Utah bankruptcies? What about the state’s lower than average wages and larger than average family size? What about the sharp price increases in food and fuel?

I don’t expect a journalism major to have the knowledge of an economics major, but if he were to speak with one he would find out that price controls, amongst other ideas offered up in this article do not work.

The 28% APR rate cap imposed by some states does not allow consumer to borrow money for the short-term. Lenders can’t make money at 28% APR on two-week loans at that APR.

If someone is willing to offer these loans at a lower rate than what is currently avaliable then great. The reality is that market can best determine what consumers are willing to pay to short-term credit.