Comments on: CRL steps up efforts to ban payday lending in Arizona http://paydaypundit.org/2008/08/25/crl-steps-up-efforts-to-ban-payday-lending-in-arizona/ News and Information About The Payday Lending Industry Tue, 22 Jun 2010 01:27:53 -0700 http://wordpress.org/?v=2.9 hourly 1 By: Aurther's critic http://paydaypundit.org/2008/08/25/crl-steps-up-efforts-to-ban-payday-lending-in-arizona/comment-page-1/#comment-1307 Aurther's critic Thu, 28 Aug 2008 10:46:28 +0000 http://paydaypundit.org/?p=1307#comment-1307 $15 per every hundred is 15% period. $15 per every hundred is 15% period.

]]> By: Arthur Ham http://paydaypundit.org/2008/08/25/crl-steps-up-efforts-to-ban-payday-lending-in-arizona/comment-page-1/#comment-1264 Arthur Ham Tue, 26 Aug 2008 01:47:13 +0000 http://paydaypundit.org/?p=1307#comment-1264 The rent-or-own metaphor doesn't work. Whether I borrow $100 for 2 weeks or 52, I am renting the money. If you charge me $15 a year for the service, the APR is 15%. If you charge me $15 for 2 weeks, the APR is 391%. In order for me to know how expensive each loan is, I need a common measure of the interest charge. That's what the APR is. TILA requires you to disclose the APR so that consumers can make comparative judgments. Markets won't function well if there is information failure. This is elementary economics. In the olden days they used to state the interest charge as a monthly rate. We could do the same thing today, but payday loans wouldn't smell any sweeter. If 36% a year is 3% a month, then $15 every two weeks is 33% a month. That's still a loan shark rate. The rent-or-own metaphor doesn’t work. Whether I borrow $100 for 2 weeks or 52, I am renting the money. If you charge me $15 a year for the service, the APR is 15%. If you charge me $15 for 2 weeks, the APR is 391%. In order for me to know how expensive each loan is, I need a common measure of the interest charge. That’s what the APR is.

TILA requires you to disclose the APR so that consumers can make comparative judgments. Markets won’t function well if there is information failure. This is elementary economics.

In the olden days they used to state the interest charge as a monthly rate. We could do the same thing today, but payday loans wouldn’t smell any sweeter. If 36% a year is 3% a month, then $15 every two weeks is 33% a month. That’s still a loan shark rate.

]]>