Forbes columnist John Koppisch analyzes the messaging of th anti-payday lending forces in Montana:
Capping the rates, proponents argue, will enable needy borrowers to get the cash they need at a much lower price. All in all, it’s a play for the economically illiterate vote.
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The reality is different. A 2007 study by the Federal Reserve Bank of New York said payday loans shouldn’t be considered “predatory” because they often make customers better off by making it easier for them to get credit. Another study, by a researcher and an economics professor in 2008, found “no empirical evidence that payday lending leads to more bankruptcy filings, which casts doubt on the debt trap argument against payday lending.” Most importantly, capping rates won’t make the loans more affordable; instead the loans won’t be available at all. In fact, borrowers might pay more in fees if they can’t get loans and end up bouncing more checks.
It is time to be realistic.
Once a payday loan initiative makes it to the ballot box…it’s over.
CRL, Fox, et al, has won the propaganda war to view the interest on 2 week loans on an APR basis instead of a fee basis. One must also admire their tactic to lower the rate to 36% instead of being truthful and banning them. This way, they don’t have to answer questions about the lost jobs, lost commercial real estate income, lost state and federal taxes, lost credit opportunities etc..