Stunting financial innovation
September 17, 2009 | Business Week, federal legislation, industry | Comments (0)Terrific piece in Businessweek:
Assessing the usefulness of innovations can be difficult. Progress Financial in Mountain View, Calif., doing business in the state as Progreso Financiero, makes small, short-term loans to low-income Hispanic customers via desks in supermarkets and other convenient locations. California limits effective interest rates on such loans, factoring in fees, to around 36%. Sounds reasonable, but Progress Financial CEO James Gutierrez says the cap is stunting the growth of the sector, noting that firms like his are competing with payday lenders that can charge effective annualized rates of 400%.
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