Payday Loan Industry Bad; Mob Racketeering Good
Yesterday in St. Louis, opponents of the payday loan industry held a hearing, which was covered by the Post-Dispatch and linked to by Combest.
Here is my advice to every person in Missouri: Stay away from the payday loan industry; the vast majority of the time, it is a terrible financial decision to make use of it. Here is my advice to the government: Stay away from the payday loan industry; it is not your role to interfere in private contracts and prevent people from making poor financial decisions.
Then there are the unintended consequences that would result from eliminating, or severely restricting, the industry. It is not as though the people who now use payday loans would suddenly no longer have any need for a loan. Some would move into receiving loan services from the banking system (a good result), some would entirely lose the ability to obtain credit (a mixture of both positive and negative results), and some would turn to the loan shark industry with all of its attendant risks, violence, etc. So, if you want to improve the climate for loan sharking and enforcing collections with baseball bats, then by all means legislate the payday loan industry out of existence.
This set of arguments about payday loans has also been covered by Show-Me Institute op-eds superior to this blog post.
Dave, if Rocky has taught me anything, it’s that these loan sharks get a bad rap. Look at Tony Gazzo. Not only did he give Rocky money to go out on dates with Adrian, he also financed his training. Tony was there to help Rocky quit smoking and was ringside for each of his title fights against Apollo. Who gave Rocky work before he hit it big? Gazzo. Who offered Rocky help to invest the money he made fighting Apollo? Gazzo. He was a stand-up citizen. Sure, he wanted Rocky to break Bob’s thumbs, but you know what, Rocky didn’t. Tony knew Bob was good for the cash, so he forgave him for being late. Let’s see a bank show such sympathy. If drafting legislation against Pay-Day Loan Services means more people like Tony Gazzo receiving more business, then I am all for it.
http://www.imdb.com/character/ch0002260/
Comment by Jake Voss — February 19, 2010 @ 1:38 p.m.
When I read the words “Dave, if Rocky has taught me anything. . .” I knew the comment had to be by Jake. You’re telegraphing your punches!
And Dave, I completely agree of course. What seems like an obviously bad financial decision to people who do not patronize payday loan establishments may be the very thing needed by the kind of people who do. Circumstances and preferences should dictate behavior, not legislators.
Comment by Josh Smith — February 25, 2010 @ 4:22 p.m.