Payday Loan Customers Hurt by Interest-Rate Ceilings
Recently, several states have implemented payday loan interest-rate ceilings reducing customer access to expensive payday loans. At first, this legislation on the payday loan industry might seem in the payday loan customer’s favor, but really, ceilings on payday loan interest rates may hurt low-income families reliant on payday loans when unexpected expenses arise.
In his article, titled “Usury Ceilings Hurt Low-Income Families Most,” Ph.D. J. R. Clark writes, “The availability of even expensive short-term credit enables consumers to survive financial and other “shocks” that would otherwise cause them to seek bankruptcy protection, leave the workforce, or forgo crucial purchases, including medical care or auto repairs essential for a worker’s commute.”
Without access to payday loans, much of the under-banked community would be left to struggle with emergency expenses that could be taken care of with a payday loan.
As payday loan interest rate ceilings are introduced, many payday loan companies are forced to drop out of states where they previously did payday loan business. This reduction in access to payday loans can force payday loan customers to borrow its payday loans from unregulated and unlicensed payday loan companies. Dealing with any unlicensed company is always risky whether a cash advance or payday loan is involved or not. When payday loan companies are not licensed, their payday loan interest rates may be several times higher than licensed payday loan companies.
Ph.D. J. R. Clark goes on to write that there is significant academic and market evidence that high-interest lending such as payday loans increases the welfare of borrowers. To view his entire payday loan article, click below:
