At a conference held today in Washington, D.C., a report including reccomendations for addressing the “culture of debt” was released.

CFSA President D. Lynn DeVault had this to say in a press release:

“While the intentions are good, the recommendations in the report demonstrate the complexity of small-dollar, short-term credit offerings and their costs.  So-called ‘solutions’ such as annual rate caps would eliminate not only payday lenders, but also the model credit union alternatives described in the report as well.”

“Those who don’t understand a free-market think you can wave a magic wand and new services and products are created. The truth is, payday lenders already compete with banks, credit unions and other financial services. The market is driving the price down to its lowest cost. Knee-jerk reactions, such as imposing annual interest rate caps, eliminate services, reduce competition and restrict consumer choice.

Pointing out the contradictions in the report, DeVault refers to two of the report’s recommendations: build new thrift institutions and reform laws to impose 36% APR caps on all loans.

The GoodMoney payday loan (listed as a model payday loan alternative in the report) comes with a fee of $9.90 per $100 borrowed for the two-week period, equating to a 252% APR. DeVault says, “”Even the ‘model’ payday loan alternative could not be offered under the annual interest rate cap they are advocating.”

With all the excitement surrounding Ohio’s rally supporting the payday loan industry, the Pundit neglected to mention a press release from the Institute for American Values on Monday.  Their new campaign is titled “Confronting Debt Culture” and takes aim at what they refer to as “anti-thrift institutions.” 

 The release (which somehow links payday lending with the lottery – two items with so little in common equating them is laughable) shows that the IAV is missing the point when it comes to payday lending.  Perhaps it’s just me, but it would seem that with the average American family paying $1,200 in credit card interest each year, the average college senior in $2,600 of credit card debt, mortgages and car payments… that attacking a $300 loan a working American needs to repair a car or purchase a medication is ridiculous.  

I’ve said it before and I’ll probably be saying it again: There is a real need for short-term credit.  While IAV’s work to provide low interest loans and expand savings is laudable, eliminating payday loans, a financial option, makes no sense.