The real-world examples are proof of the consequences of overly restrictive annual rate caps. Hundreds of stores have closed, thousands of employees have lost their jobs and hundreds of thousands of consumers are left to choose among less desirable credit options.

Read more about annual rate caps in Oregon, Ohio, New Hampshire and D.C.

Read more about the research.

Who could have seen that coming? Why, It’s almost as if people seek out services to fulfill their needs!

We wish we said that, but it’s the “Oregon Commentator” sharing his wisdom in this column.

Closing payday lending businesses, intended to protect the poor from entrapment in cycles of debt, eliminates their last possible form of available credit, leaving many struggling to handle unexpected crises.

He notes that in Oregon, a 36% annual cap was put on the payday lending industry, and 80% of the stores closed up and went out of business.

Payday Pundit especially likes the first comment posted in response, “I enjoy seeing states tighten credit in the middle of a credit crisis – it reinforces my view that politicians have no clue what they’re doing.”

Update: thanks to a reader for pointing out that “In Oregon it’s a 36% annual rate cap plus a $10-per-$100-borrowed loan origination fee. If it was just a 36% annual cap, like they’re proposing in Ohio, 100% of the payday loan stores would have closed.”

Last month, Merkley did the opposite of “strenghening” the economy and actually held an event where he celebrated lost jobs in Oregon.

In a stunt to gain publicity, House Speaker Jeff Merkley toasted the closing of payday loan stores in Oregon.  

As seen in other states where payday lenders have been forced to close their doors, Oregonians will now spend more money bouncing checks, using overdraft protection, and paying bills late. 

Congrats Speaker Merkley.  While you are toasting the closing of legal, regulated, tax-paying Oregon business, hard-working Oregonians are left without a credit option and forced to choose between other, more costly short-term credit options they had previously tried to avoid. 

Speaker Merkley, while you’ve eliminated a credit option, the need is still there.  You’ll have to answer to the consumers whose credit choices you’ve limited and the employees whose jobs you’ve taken away.   

Allan Jones, Check into Cash CEO, explained that many stores closed when the legislature passed the 36% APR cap. No longer able to offer payday loans, they tried to meet customer needs by offering check cashing services and a new loan product.  “These new products were not popular with consumers, nor profitable for the company,” said Jones.

Also from the release:

“With the closing of our remaining stores, Oregon citizens will no longer have access to short-term credit and will be forced into costly products such as overdraft protection and bounced check fees.”

“We tried to work within the constraints of the law, but lost money each and every month we tried to operate there under the new rules. We have proven that it cannot be done.”

 “We are saddened that we have been forced to close our stores, putting our employees out of work and leaving our customers without a service they appreciated.”

“As we warned the legislators in Oregon, payday lending cannot be offered under a 36% rate cap. An annual percentage rate of 36% applied to a two-week loan amounts to less than a dime a day on a $100 two-week loan. That cut us from $15 to $1.38 for the two-week transaction. The legislators seem fixed on the APR of 391% as being bad, when in reality, it amounted to $15.”

Mr. Jones said it best when he stated, “The legislators will now have to answer to the tens of thousands of consumers whose credit choices are now limited because this type of micro-lending has been abolished, forcing consumers to more expensive options where no APR disclosure is required, such as overdrafts.”

While some industries, like construction, were victims of a market slowdown, payday lending employees were victims of over-regulation.

In states like Oregon and Pennsylvania, the payday lending industry has been virtually regulated out of business, leading to the loss of thousands of jobs (with health care, paid time off, and retirement benefits). Not to mention the elimination of a popular and regulated credit option for consumers.

Seems like we should be creating new jobs and providing access to credit, not taking both away.