Once again the Law of Unintended Consequences coupled with an unfailingly defective understanding of human behavior and economics.
Do they think people that use Pay Day loans are too stupid to tell they’re high interest and foolishly use them instead of selling their Krugerrands?
Do they think lenders will offer the loans more cheaply and enjoy less or no return on capital risked? Probably by snorkeling into their Scrooge McDuck basement full o’ currency.
I guess so.
We had federal usury limits on credit cards and such throughout the 60s and 70s, and the economy prospered.
While I appreciate the need of the credit-challenged for money on occasion, charging these desperate people as much as 200% annual interest on car title and other loans does not help in the long run, but bleeds them for extended periods of time. Some never climb out of that credit trap.
With hard security like automobiles, charging such astronomical rates is unconscionable. I do not ordinarily support federal intervention in the marketplace, but this abuse of the poor is obscene and needs to be addressed.
On one of my computers, I captured a graphic of a loan advertisement.
In the small print was the interest rate. 108%
It was from a Native American reservation.
Well ya can’t have everything.
We could legalize loan sharking and that would open up even more credit to even more Americans. But does anybody really want to do that?
You are always going to have to make judgments about whether the moral cost of doing something is actually worth the increase in growth.
Perhaps the Government should impose an interest rate limit on private businesses when they themselves stop charging exorbitant high interest rates.
In Texas - delinquent property tax rates can escalate to 23%.
IRS tax penalty rates can max out at 25%.
We had usury laws capping credit card interest rates until SCOTUS decided to scrap that historic practice in 1978, Marquette National Bank v. First of Omaha Service Corp.
A decision that also set in a motion a vast increase in the debt level owed by Americans. Ben Franklin’s admonitions about owing money were ignored.
This indifference to debt has created the student loan industry. It prospers by having purchased protection from bankruptcy laws and by taking advantage of the gross ignorance of 18 yr olds.
Lenders and colleges need to have some skin in this game so that they quit throwing money at worthless degrees. They have been sowing the seeds of socialism in the kids who end up with all of this debt with nothing to show for it.
In the long run it'll be better for them!