Idaho should put a cap on payday loan interest rates – Idaho Press
Idaho is a state which traditionally cherishes freedom and
individual responsibility. Idahoans generally tend to be wary of
government intervention, particularly in business.
There are, of course, people on the two extremes. Some want a
huge government to regulate and operate virtually everything. They
view private enterprise distrustfully and think its only motivation
is greed.
Then there’s the other side. They want essentially no government
involvement in anything, save perhaps the pavement of roads and
police and fire departments. They view government as inherently
oppressive and totalitarian. They would no doubt scoff at the bill
in the Idaho Legislature that would prohibit teens from using
tanning beds in an attempt to fight skin cancer.
People on the edges tend to get a lot of media attention, but
there are a lot more of us who are somewhere in the middle. We
appreciate free-market principles but also believe in a limited
amount of regulation to prevent abuse and protect those who can’t
protect themselves.
Libertarian types would argue that Idaho has no business putting
a cap on the interest rates payday loan providers can charge.
Borrowers are fully aware of what the legal terms are when they
take out the loans, and if they can’t repay those quickly, that’s
between them and the lender.
But who takes out payday loans? Poor people who usually don’t
have enough money to pay for basic necessities, so they need a
little extra cash until their next paycheck.
With all due respect to the private sector, the idea of soaking
these kind of people with interest rates of up to 400 percent flies
in the face of common decency. Idaho should cap those rates at 36
percent.
The average payday loan goes for about $300. The total cost to
someone who pays the loan back within a week or two is about $350,
counting fees and interest.
Fair enough. For people with bad credit, it’s a way to get
needed cash. And it’s cheaper and easier than dealing with a bank
over a bounced check, late bill payment penalty fees, utility
disconnection fees, etc.
But borrowers who can’t repay the loan quickly get nailed big
time. And people who are living hand-to-mouth deserve a reasonable
amount of protection.
House Bill 470 wouldn’t outlaw payday loan businesses. It would
simply limit the interest rates they can charge.
Government intervention in the private sector? You bet. But we
also have a Food and Drug Administration that regulates the food we
eat to make sure it doesn’t make us sick. That’s government
intervention in the private food industry. Is that tyranny, or is
it the kind of thing we expect in the society we want to live
in?
In 2010, Montana — another Libertarian western state — capped
payday loans at 36 percent. Several such lenders packed up and
left. That’s their prerogative. If that happens here, life would be
more complicated for people who need the loans.
That leaves us with two choices: run the risk of driving out
businesses that will yank their stakes and blow town when their
profit margin isn’t high enough, or run the risk of making it
possible for those businesses to drain the pockets of poor people
living paycheck to paycheck.
All things being equal, let’s go with the first option.
© 2012 Idaho Press-Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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