It took me a long time to realize it, but whenever somebody shouts, “Something has to be done,â€, legislation doesn’t actually make things better. In fact, it usually makes things worse. Of course, I’m thinking about payday loans but other things as well.
Okay, so a bunch of people don’t like payday loans. Well, why put a 36% APR cap on them and take that choice away? Why not attack the underlying problem instead? First, how about getting Texans and Americans some financial education? I had to learn how about loans and interest rates and balancing checkbooks and budgeting all on my own. I bet if everyone who wants to graduate high school had to take a personal financial education class, the need for payday loans would be reduced.
Here’s another idea: competition. If the government is so keen on spending money, how about if it encourages people to come up with an alternative to payday lending? Maybe offer a tax credit or other incentive if your business directly competes with payday loans? I don’t actually like the idea of using tax money to encourage innovation, since innovation should itself result in a monetary reward. But if the government has to “do somethingâ€, why not try that instead?
Read more at paydayloanfacts.org
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