Ever wondered why some folks are so exercised about so-called “payday lending“? An unsigned blurb in the latest National Review offers an interesting assessment.
A great dynamic animating much social policy, seldom acknowledged, is rich people’s revulsion at how poor people live. Hence the Obama administration’s assault on “payday” lending, the last-resort financing for people unable to access traditional credit products. Payday lending can be unsavory, and though the fees involved may be modest in absolute dollars, they can be shocking expressed as an annual interest rate: A 15 percent fee for a two-week loan of $200 is only $30, but expressed as an annual interest rate, that’s 390 percent. Most people do not take out such loans expecting to carry them for a year or more, though, inevitably, some do. The rules proffered by the Obama administration are typical of the these-poor-plebs regulatory model, in that they will cut the poor off from loans while doing nothing to replace them, which means that the payday lenders’ loss is likely to be the pawnbrokers’ gain. The fundamental problem here — which is by no means limited to the poor — is that a great many U.S. households do not carry sufficient liquid savings. Of course it is difficult to save when living hand-to-mouth, but there isn’t a regulatory fix to Americans’ general lack of thrift, though strong economic growth and a buoyant job market would do a great deal of good. Meanwhile, those in dire immediate need will be cut off from their lenders of last resort because of a regulatory fit that is mainly not economic but aesthetic in origin.
