As mentioned earlier on the Payday Pundit, U.S. Senators Akaka, Schumer, Lieberman, and Inouye have introduced a bill that would create a grant program within the Department of the Treasury.

The grant would encourage the “development of affordable payday loan alternatives at mainstream financial institutions. Consumers who apply for these loans would be provided with financial literacy and educational opportunities. Loans extended to consumers under the grant would be subject to the annual percentage rate promulgated by the National Credit Union Administration’s (NCUA) Loan Interest Rates, currently capped at an annual percentage rate of 18 percent.”

Anyone who knows anything about short-term credit fully understands that you cannot offer payday loans at 18% APR.  An 18% APR would equate to a fee of 69 cents per $100 loaned for the two-week period. Not sustainable. So, federal grants would provide banks and credit unions with the funding to at least break even.

Is this really the best use of America’s tax dollars?