From an interesting blog called Necessary Roughness, not only the blog post itself, but the comments following the post are worth the read. Intelligent people debating the merits of credit, without all of the hype. We need more of that. An excerpt:
Payday loans are a risky business. If a customer is demanding a payday loan, the risk that customer may not pay back the money is phenomenally greater than the person who can pay for a car in cash. The payday creditor must make money from other loans to cover the losses on loans that default. The market currently exists because some people can pay those loans at those interest rates. If the interest rate is capped below a point where the creditor makes money, the creditor will have to get funds elsewhere or go out of business.
One comment asks the question, “what if instead of setting a maximum interest rate, the state legislature instead passed a law that only required the lenders to report in big letters the annualized interest rate for the loan, or something that would insure that the putative debtors truly understood the cost of what they were getting into?” The Payday Pundit wants the commenter to know that members of CFSA, the national payday lending trade association, are required to post their fees (in both dollars and APR) in large font on poster-size displays in all stores. Read more on the industry’s fee transparency at www.knowyourfee.org.
