We once had federal usury laws.
I'm against them, as I am against just about any implementation of any form of price controls (interest being the price of money).
I'm against such laws from states as well, but they aren't quite as bad, because I don't see them as unconstitutional; but they are still anti-liberty, and have negative practical effects.
No one is going to give someone, esp. someone without great credit, an unsecured, short term, fairly small loan without either charging very high interest rates, or high fees. The cost to process the loan, collect the money, and the costs of the losses that do occur when some people don't pay back the loan have to be met (and exceeded in order to make a profit). Ordinary, even fairly high interest rates are not enough. The interest on a few hundred dollars for a few days is negligible unless the interest rate is extremely high. Outlaw both high interest rates and high fees on such loans and your saying that people in need of such loans can't get them.
Also even if the actual interest paid on such loans (not just the interest rate) was very high (and normally it is not), I don't see anything wrong with that as long as the terms are clearly disclosed and there was no force or fraud involved. If I want to loan you $100 at 10^50 percent interest and $1bil dollar late fee if you don't pay on time, I should be free to do so (and you should be free to tell me to go to hell, when I offer such ridiculous terms)
Beyond that if you outlaw pay day loans, people who need short term cash will still need it. Some will go to pawn shops, some will go to loan sharks and get even worse terms, with harsher late payment penalties. |
