From the Great Falls Tribune:

The latest congressional crusade is to clamp down on small finance companies that provide “payday loans” and check-cashing services in many low-income neighborhoods where there are few banks.

A common practice in making small loans of a few hundred dollars for a few weeks is to charge about $15 per hundred dollars lent. Politicians, the media, community activists and miscellaneous other busybodies are able to transform these numbers into annual percentage charges of several hundred percent, thereby creating moral melodramas and demands that the government “do something” about such “abuses.”

Of course, these loans are seldom borrowed for a year. They are often loans for a couple of weeks or less, to meet some difficulty of the moment by people who live from payday to payday, whether they are being paid by a job or are receiving checks from Social Security, unemployment compensation or welfare.

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.

The ‘Mafia Loan Shark’ vs. ‘Payday Lender’ argument is so overdramatic and incredibly inaccurate. ‘Loan sharks’ do not have any disclosure rules, rate caps, or requirements. They also have lower risk of default than payday lenders. I think anyone would rather have their paycheck garnished than have an arm broken.

A recent hearing in the U.S. House of Representatives addressed legislation requiring banks and credit unions to calculate overdraft protection fees as an annual percentage rate (APR) under the Truth in Lending Act (TILA). Bank and credit union officials testified that APR was not an accurate measurement of short-term credit.

Kenneth J. Clayton, American Bankers Association (ABA):

“Any time an annual percentage rate is calculated for a term less than a year, the inclusion of a fixed fee, even a modest one, will distort and overstate the APR. The shorter the repayment period, the greater the APR will appear in instances where there is a fixed fee. This means that the sooner the consumer repays, the greater the calculated APR – a difficult concept to explain to consumers, as it appears that paying earlier actually increases the cost of credit.”

Read more excerpts

In a LTE, Laura Polacheck of AARP Utah wrongly claims that “ All forms of credit are required to post an annual percentage rate so consumers can compare the rate at which interest is being charged.”  This, in fact, is far from the truth.   

If asked, consumers don’t care what it would cost them to have a payday loan for an entire year.  They want to know what they will actually pay, what the total cost will be out of their pocket for the term of the loan, not some hypothetical percentage.  All of the research shows that consumers do compare the alternatives and do make educated decisions on which short-term credit products to use. 

Walletpop has the scoop on the dumbest money saving tips.

PDLindustryblog weighs in on Washington state.

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They like the Tim Miller letter in the WSJ.

No better day to visit Consumersrightscoalition and let your voice be heard.