British Columbia pushes for reform
It seems the United States isn’t the only country whose lawmakers are pushing for payday loan legislation. Regulators is British Columbia, Canada, are also seeking to put a cap on interest rates on payday loans.
Lower interest caps
The regulations sought in British Columbia are even more stringent than the ones many United States lawmakers have set. Several states in the U.S. have capped payday loan interest rates at 36 percent.
Solicitor General John van Dogen has said British Columbia will limit annual interest on payday loans to 23 percent. He says other regulations will prohibit lending more than half the estimated amount of the person’s next paycheck.
Payday lender perspective
Most payday lenders would likely tell you that limiting the amount of a loan to half a paycheck makes good, responsible sense.
However, setting such a low interest rate on a loan to what could potentially be a high-risk client is dangerous for the payday loan business. Many large payday loan companies have already been driven out of states that set interest rate caps.
Religious group advocates in Kentucky
Normally, only lawmakers and business-sector lobbyists run campaigns for payday lending reform. However, a coalition of churches in Louisville, Ken., has banded together for the cause.
The church groups are pushing for the common 36 percent interest rate to apply in Kentucky. The members of the group, called CLOUT, admit that there is little chance their efforts will amount to anything.
Sound reasoning in Kentucky
Jeff Kursman, spokesman for Check ‘n Go, says advocacy groups would be better off promoting consumer education. If borrowers understand the terms of payday loans as well as high-cost products offered by traditional banks, they are more likely to avoid debt.
Trust BC to save the public from high interest payday loans but ignore failing health care and education.
I don’t get why the payday loan industry should be punished for people’s irresponsible financial dealings. Payday loans are designed for short-term usage and must be used responsibly. Money in general should be used responsible, but many people don’t. If I don’t plan out a monthly budget, spend above my means or without conscience, completely financially irresponsible, I would be basically digging myself a hole. People who are not responsible with their finances should not even consider applying for payday loans. This type of conduct sparks and escalates a “cycle of debt.”
This is yet another invasion of market principles by a nanny government. Granted, free market principles shouldn’t be used in order to mask predation, but the law of supply and demand dictates that since the demand for short term credit exists, there will be a supply, and the supplier will offer products or services that will make them a profit, and consumers will naturally seek the supplier with the most reasonable terms. Essentially, what eliminating payday lending does is invite a monopoly of banks and credit card companies – it takes away the freedom of choice and institutes corporate tyranny. Not good!