While we’re on the subject
May 13, 2009 | alternatives, federal legislation, industry | Comments (0)The Heritage Foundation put out a paper on the credit card bill using the NYFed study about payday lenders as making an argument against rate caps:
However, there is research from the New York Federal Reserve Bank[1] that suggests that the debt trap may not exist in all situations, and in fact some consumers may be better off with the presence of high-interest lenders than they are without them. This paper looks at Georgia and North Carolina after payday lenders were banned. It found higher incidences of bounced checks, complaints about the collection methods of lenders, and bankruptcy filings after the ban than before it. This suggests that high-interest lenders meet a definite need, and it raises questions whether a too-stringent approach to credit card practices may end up causing more problems than it solves.
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