In Ontario they’re debating about capping rates on payday loans. On the surface this may seem like a good thing, but my opinion is that it disables market forces and will effectively never make price competition a factor.
I’ve felt that most regulation is aimed at making payday loan companies less profitable, when they should really focus on educating consumers.
You can talk about usury, but there is a cost of doing these loans that isn’t profitable when charging double digit interest rates alone.
Comments
2 responses to “A Note on Capping Rates”
Nick,
I too am not a huge fan of capping usury rates for payday loans, car title loans, pawn, RAL’s, credit cards, bank fees or anything else. I prefer to allow the market to set rates and drive companies that are unable to compete and fail to FULLY disclose their fees and interest rates to consumers out of business.
However, we must realize that in the current economic and consumer protectionist environment we are better off with a payday loan interest rate cap that we can continue to survive under in addition to helping consumers in need of small, uncollateralized loans than for us to cease to exist.
It’s about SURVIVAL!
Jer@PaydayLoanIndustry.com
Nick,
I just found your blog thanks to Payday Pundit. If you or your readers want more info on Canada, take a look at the Advance View blog here: http://www.310loan.com/blog
On the Ontario decision in particular, there is more information and commentary here: http://www.310loan.com/blog/2009/02/ontario-advisory-board-recommends-21.html
I agree with your comments on the effect of rate caps on competition. Too bad it is such a tough sell with our elected officials on both sides of the border.
Thanks for the great blog.