Wise words in the Bemidji Pioneer

Legislators judging two-week payday loans by an annual percentage rate standard is as senseless as comparing a hotel’s nightly rate to a 12-month apartment lease (“Predatory lending a debt trap for workers,” April 1). Is a hotel a “predatory hotel” because it charges $154 per night? That’s $4,620 per month, or $56,210 per year! You can rent a studio apartment in Bemidji for about $500 per month. So, using the same price cap proposed for short-term loans, the $154 room rate should be set at a maximum of $16 per night.

A $16 price limit wouldn’t be a ban, but it’s hard to imagine many hotels staying in business with that kind of restriction. Short-term payday loans are no different: the suggested 36 percent APR limit translates to a $1.38 fee for a two-week loan of $100. The limit effectively shuts down the short-term loan service business. But that does not solve the borrower’s problem of needing a loan. It does however leave them with the traditional more expensive alternatives, including paying fees for bounced checks.

Tim Miller, Center for Consumer Freedom, Washington, D.C.