From Thomas Patterson:
Like the vast majority of Arizonans, I’m not a payday loan customer. But so long as payday loans are basically a commercial transaction between mutually willing parties, government’s first reaction should be to leave them alone.
A typical payday loan is short term and high risk. Someone with an urgent need for cash will borrow, say, $100 for two weeks and pay back $105. That’s an annualized interest rate of about 130 percent, which is what policymakers find repugnant.
But the transaction may make sense from the borrower’s perspective. He may need the money to repair his car, to keep up on child support payments, or who knows what. His options for loans are limited. Commercial banks aren’t interested in his business. Family may be tapped out.
As Byron Schlomach (also from the Goldwater Institute) points out:
While I agree with the Star that it’s not good for people to be using payday loans on a regular basis, I think the choice should be left to individuals, not government. Generally, it’s a bad idea to finance a business startup with credit cards. But I know a millionaire who did exactly that to get started in the highly competitive restaurant business. Just exactly what similar opportunities might be lost if payday loans are made illegal I can’t say. I can say with certainty, however, that they’re out there.
Why is it the government’s job to keep people from making bad decisions? And why should we forclose the opportunity to take such a risk when absolutely necessary?
