More from the piece:

        Evidence is already mounting from other states that caps on payday loans reduce choices for consumers and leave them financially worse off than before. And, ironically, the main beneficiaries of laws pounding on payday lenders have been big banks and credit unions making millions from the overdraft fees that frequently serve the same purpose as a small loan for unexpected circumstances.

Mr. Berlau has it exactly right.  Payday loan customers are frequently trying to avoid bounced check fees which if calculated as a loan would have three or four times the interest rate of a payday advance. 

As states look at consumer credit issues it’s important that they look at the facts and carefully examine the real impacts of legislation.    The Federal Reserve staff study does just that and finds that one of the unintended effects of such legislation, which we see in states like Georgia and North Carolina, are increased credit problems for consumers.

To ignore what is already happening to individuals in states without payday lending and to continue on an assault on an industry which provides a better option for many in a short-term credit crunch is foolish and damaging to consumers.  Legislating payday loans into fee structures which are impossible to operate under extinguishes consumer choice.  We already see that individuals are forced to turn to more costly credit options when payday loans aren’t available.

The Open Markets Blog of the Competitive Enterprise Institute took note of this and posts on the report.  Kudos for highlighting this important piece of research.