Payday Pundit

In yesterday’s Concord Monitor, a Mr. Paul Stillwell put forth his idea for a plan to replace payday lenders in New Hampshire.  The Payday Pundit doesn’t agree with his point of view (calling payday lenders “parasitic” is a bit over the top), but at least Mr. Stillwell has a suggestion that doesn’t involve borrowing money from friends and family.

[We could] create a community-owned pool of money to be used expressly for emergency credit. A lender commits money into a community owned CD for a period of years with a higher-than-average rate of return, say 6 percent. Once the pool has grown to a sufficient size a partner organization, whether a credit union or local bank or other nonprofit offers emergency credit lines at a decent rate of 16 percent or so [for six month or one year terms].

So this plan would rely on banks and credit unions to administer the loan origination (which would likely lead to fees passed onto consumers or the community), and it would require the cooperation of many “investors” in the community to get the emergency pool up and running.  Not really a short-term fix.  This plan could very well be a competitive answer to payday lending, but politicians in New Hampshire chose strong-arm tactics instead of free-market philosophy to regulate the industry.