That’s what this article in the Denver Post says of the Colorado payday lending legislation.   The  coverage  fails to mention that an effective ban on payday lending would have done nothing to help consumers in Colorado.  Consumers are best off when they have all the necessary information and are able to make financial decisions based on what’s best for them.  Banning a credit option is not “protecting consumers.”

One of the comments in response to this Denver Post op-ed raised the old canard about payday lenders “targting” certain neighborhoods.   This was the next response:

 ”Payday loan companies pop up in markets where there is demand for them. Using your logic, I guess I could say that BestBuy pops up in my neighborhood to prey on those that can afford to purchase TV’s.” 

Terry Kibbe of the Consumers Rights League has a guest piece today in the Denver Post that picks up on recent research by Don Morgan of the NY Federal Reserve. 

Money quote: ”Morgan also questioned the validity of the research from the Center for Responsible Lending saying the Center ‘overstated the number of problem borrowers.’ He noted that banning payday loans actually leads to more people bouncing checks, filing for bankruptcy and fighting with collectors. After payday loans in Georgia were banned in 2004, Morgan found, “bounced checks in the Fed processing center in Atlanta jumped by 1.2 million, a 13% increase.”

Jeffrey S. Zax, an economics professor at the University of Colorado at Boulder takes a different approach to the debate over payday lending.  In his letter to editor to the Denver Post, he writes, ”Payday lenders’ interest rates seem outrageous. If payday lenders are actually making unconscionable profits, why aren’t other lenders entering the market?” Mr. Zax goes on to write, ”The first legislative priority should be to examine the regulatory regime to find out why competition isn’t working. If it can be encouraged, interest rates will go down and the supply of loans will increase. If, instead, rates are capped, they’ll go down but so will loan supply. Borrowers who can still get loans will benefit, but those who can’t will wish that they were allowed to pay higher rates.”

Smart words from someone who knows economics.