It took me a long time to realize it, but whenever somebody shouts, “Something has to be done,”, 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 something”, why not try that instead?


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