Pay day loans II

Luke at Smoke if You Got 'Em has some good points on the pay day loan operations.

However, I'd like to ask some question on his points.... let's go through them.

Luke....

While I don't doubt that the lottery is merely a method for the state to get the money back that it has paid to the poor, I do think that payday loans are more destructive. Moreover, even though I'm not one for government intervention in the free markets, I would support more regulation of these operations.

So it's OK for the state to rip off the poor via the lottery so they "can get their money back" but not OK for a private company who gave the state their money to begin with?

Luke...

The reason I support more regulation of these businesses is because of the lack of regulation compared against other "banking" style operations like banks, credit unions, and mortgage companies. All states, and even the feds, regulate banks, credit unions and mortgage companies to some degree. In fact, one might even consider them to be highly regulated entities. But payday lenders are not regulated as uniformly. It's true that more states are beginning to pay more attention to payday lenders, but as it stands they are largely unregulated. Now, I'm not saying that I would support really stringent regulations that require all kinds of reporting and record keeping. My main focus would be on the interest rates charged. A loooong time ago, states used to have "usury" laws that prevented lenders of any kind from charging exorbitant interest rates on money loaned. However, I believe only Utah has usury laws still on the books. All other states, including Ohio, have done away with them.

Consider that the reason these payday loan operation sprang up in the first place is because of the regulation of banks, S&L's and mortgage companies. The companies setting these businesses up are simply filling a banking need that the traditional banks cannot do because of regulation. One of the largest of the payday operations in Ohio was created by the ex President of then Cincinnati based Provident Bank. Don't you think he would have loved to get Provident in on those deals if regulation hadn't tied their hands to do so?

Second, if you take the profit motivation out of these payday loan operations they will go away. Now the poor have no place to do "banking" business except loan sharks and pawn brokers; hardly a better alternative.

I wonder how Luke feels about grocery stores like Krogers that charge more in inner city stores than they do in the suburbs. Are they gouging the poor? Why shouldn't we regulate them?

What about operations like Jackson Hewitt, HR Block, 7/11, JB Byrider, et al. who have made dealing with the poor a cottage industry. Should we regulate them since they charge poor customers demonstrably more money than suburban operations?

Once again, the conventional wisdom is that "the poor" are some kind of brainless group of disenfranchised citizens. In fact, most of "the poor" are that way for a reason. If most of them would give up their cigarettes, booze and lottery tickets, they wouldn't need to use pay day loan operations to begin with.

Please read my earlier post on a rapid refund conversation I had with a "poor" person. I guarantee that's more the norm than the exception.

I challenge anybody who believes in regulating these operations to go into any convenience store on the beginning of the month. You'd think it was Christmas. You would no longer wonder why pay day loan operations exist.

Look, I hate defending the people who run these businesses. I feel the same way about defending sex offenders against these ridiculous sex crimes laws. But I'm going to call out the total hypocrisy on these issues.

I also like the debate on this issue but I'm still waiting for someone to tell me why it's OK for the state to "rip off the poor" rather than private business. The state after all, is a reflection on it's citizenry, so in essence we're saying is "it's OK for all of us to rip off the poor as long as we get to share in the profits equally".