Uncle Sam: Payday lender
May 10, 2010 | federal legislation, industry | Comments (0)From an interesting new blog post at the CATO Institute:
Where Hagan proposes to ban payday, Dodd proposes to have banks and non-profits directly compete with payday lenders, but with one big, important difference: taxpayers would cover a substantial portion of the credit losses. Buried at the end of Dodd’s massive bill in Title XII is a grant program that would cover credit losses on “payday” loans made by non-profit community lenders as an “alternative to more costly payday loans.” Of course the private sector loans will be more costly, as the lender will have to charge a rate that covers its losses. The difference between Dodd’s proposal and the private sector is that while private sector payday loans may be expense, they are entered into voluntarily, whereas Dodd make the taxpayer an unwilling participant in subsidizing high risk borrowing. Perhaps Dodd should examine previous efforts to subsidize high cost mortgage lending, before we repeat the same mistakes in payday.
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