Anyone reading this column knows of my support for payday loans and the necessity for this option to consumers. Yet I haven’t examined the hypocrisy of consumer advocates, state legislatures, and Congress with regards to this issue.

The argument goes like this: PDL opponents are up in arms about 1) how PDLs allegedly harms consumers by “trapping them in a cycle of debt”, 2) the immoral nature of the business, and 3) how they rely on repeat business to make a profit.

All these opponents expend enormous amounts of energy and money attacking payday loans, and yet there are so many other products on the market that have verified detrimental effects on their users that go far beyond those that payday loans allegedly do.

It’s disclosed in SEC filings of public PDL companies that 94% of all loans are paid back on time. For the tiny minority that ends up taking out one loan to pay off another, let’s first remember that the blame falls on the consumer for 1) taking out a loan they weren’t certain they could pay back on time, and 2) that they did not ask their lender for a payment plan. The worst case scenario here is that the consumer ultimately defaults and is chased by collection agents. Their credit is not affected.

Payday lenders are unfairly attacked as being “legalized loan sharking”. In that case, I have one question:

What label should we attach to state lotteries?

How about “legalized thievery”?

We all know the odds of actually winning the lottery are astronomical. And yet, estimates put the amount of money wasted on all state lotteries in 2007 at over $21 billion. 99.9% of those that play the lottery receive nothing of value in return. Nothing.

Payday loans generated $6 billion of revenue in 2007, and each and every customers got something in return: short-term credit. That’s hard cash needed to pay a doctor’s bill, get a car fixed, get a magician for a child’s party, put a down-payment on an engagement ring.

And yet, mysteriously, the same opponents to payday loans who insist that payday loans are eeeeevil, and baaaaaad for customers, and that the people who use them are “unsophisticated”, don’t make a peep about the legalized robbery going on right in front of their collective faces. Maybe the difference is – GASP – lotteries bring in massive amounts of revenue to the states. Apparently the amount of revenue brought in by the lottery exceeds the sum of the business tax revenues lost by banning payday loans plus the political capital gained by being a “consumer protector”.

Need I mention that cigarettes have no redeeming value whatsoever, and yet the amount spent on that product is in the billions annually? That it has proven detrimental effects on its users? That it creates an enormous strain on health care services in every state? And that – GASP – the tax revenue from tobacco is not only enormous but almost always the first thing to increase when there’s a budget shortfall.

Liquor? Fast food? The list goes on and on.

And yet – and yet – despite the verified detrimental effects these other products have – despite how they truly take advantage of people – all those who purport to be “looking out for the consumer” spend all their time and energy on a product that has vast benefits and minor drawbacks for consumers.

What a shocker.

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