Comment history for JonSchultz

JonSchultz  (anonymous) says...

The first link in my post above has expired. A summary of the George Mason University and Colby College study can be seen at http://www.reuters.com/article/pressR... with the actual report at http://papers.ssrn.com/sol3/papers.cf...

JonSchultz  (anonymous) says...

The critics of payday lending have presented no credible evidence that the service, on average, does more harm than good. To the contrary, researchers from George Mason University and Colby College recently found that “access to payday loans in their environment, all else fixed, increases a borrower’s probability of financial survival by 31%.” See http://news.findlaw.com/prnewswire/20...

Similar results were reported in two studies by a research officer with the Federal Reserve Bank of NY. See http://www.newyorkfed.org/research/st... and http://www.newyorkfed.org/research/st...

Usury is a religious concept which originally meant the "sin" of charging any interest whatsoever on a loan. If we want a democracy and not a theocracy then we need to keep this concept out of government and abolish the tradition of usury laws just as we abolished the tradition of slavery - which also dated back thousands of years. There is no legitimate reason why a lawyer or grocer should be allowed to set his own price, but a lender should not. Freedom of commerce is just as important as freedom of speech.

In fact the APR of a payday loan tells you nothing about how profitable the loan is for the lender, because it ignores his cost in making the loan, or how wise the transaction is for the consumer, because it ignores his other alternatives. The APR is a statistical tool which only has value for comparing loans which a consumer has access to; if all other factors are the same, his wisest choice is the one with the lowest APR. But most payday loan borrowers do not have access to any other type of credit, so comparing the APR of payday loans to that of personal loans or home loans is irrelevant.

If a 365% APR was inherently outrageous then the statement "I will lend you $100 today if you will pay me back $101 tomorrow" would be an outrageous statement, but it obviously isn't. In fact most people would not make that statement, because they wouldn't want to risk losing $100 for just $1 in profit - and that doesn't even consider any cost whatsoever in making the loan!

I'm sure our soldiers now feel wonderful knowing that they may be asked to sacrifice their life for a country which doesn't even trust them to borrow a few dollars until their next payday because such loans have been regulated out of existence for them.

The figure released by the Center for Responsible Lending and widely quoted in the media, that the average payday loan borrower pays back $793 for a $325 loan, is false. Veritec Solutions, the company whose figures CRL used as the basis for that assertion, subsequently released an analysis stating that CRL misinterpreted the data. It can be seen at http://www.veritecs.com/CRL_Whitepape...

The Consumers Rights League has issued its own report on the Center for Responsible Lending. See http://www.consumersrightsleague.org/...