Rate caps hurt poor people
September 2, 2008 | best practices, customers, industry, media coverage, positive media coverage | Comments (2)Professor J.R. Clark has a provocative op-ed out today that says poor people are hardest hurt by rates caps:
In the past 30 years, the democratization of credit has been one of the most powerful forces for economic progress by lower-income groups in the U.S. economy. In the 1990s, as interest rates continued their deregulatory trend begun more than ten years earlier, the number of homeowners in low- and moderate-income communities grew by 26.6%, which was nearly twice the growth rate of homeowners in high-income areas. The greatest gains accrued to the least well-off consumers primarily because the removal of price restrictions in credit markets benefits highest-risk borrowers the most.
When interest rate ceilings are imposed, they adversely affect the wellbeing of the very consumers whom they were intended to protect.
The whole thing is a must read.
Comments»
It is welfare enhancing, because that minority of payday loan customers either 1) had an emergency need for funds so critical, at one or more times, that it made the fees of the multiple loans a welfare-enhancing proposition, or 2) simply needed to learn from the school of hard knocks not to borrow irresponsibly, just as many people need to learn from the sickness they develop from eating too many desserts not to make that mistake. Do you want the government to place a cap on the amount of fat and sugar allowed in ice cream? Are ice cream manufacturers “preying” on the weakness of lonely people who seek solace in their oh-so-tempting product? Maybe every time you buy ice cream, Arthur, it should go into a database which the grocery should be required to check before they are allowed to sell it to you. If you make yourself sick and don’t have insurance our tax dollars will have to pay for your care. And by the way, do you do any nonessential driving? Think how many problems would be alleviated if gas stations weren’t allowed to tempt people to spend more than they can afford on gas…
Go to China, Arthur, you’d probably be happier there.
I think Aurthur will benefit financially from us closing, there for no other terms mater to him. He isnt about teaching people ways to get out of debt, he is into taking away options that help them in a time of need. This way they have more over draft and NSF charges. WAIT HE’S A BANKER!!!! great way to boost the economy banker, great way to keep these people paying your extra bank charges. If he would go to China, I think they would turn him out and his true colors would shine!