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Payday loan limits

22.05.12

A sword with two edges has been tense by Rep. Brad Daw, R-Orem.

Daw wants to compile a state database of people who have considerable-interest payday loans so as to prevent them from taking out more than one such loan at a time.

At one level, the idea is appealing. Payday lenders do make capital out of some of society's most vulnerable people, creating financial millstones that tend to maintain themselves. It's hard to get out of the financial head-lock when you're paying interest rates that average 500 percent and can reach higher than 1,000 percent.

On the other effortlessly, Daw's idea smacks of Big Brother. Why should the state make moral judgments for individuals about what constitutes too much liable? Shouldn't a person decide that for himself?

Clearly, the crushing weight of payday loans is confirmed by how many cases end up in court. Cases involving the elevated-interest loans account for roughly 80 percent of the small-claims cases in Fourth Department Court, 70 percent of Provo's justice court cases and 62 percent of all cases in Utah County.

This backs up earlier studies that showed alike resemble trends. The payday loan industry claims that only a minuscule number of loans go into non-payment and that government shouldn't be involved.

But government is already involved, acting as the bill collector for allowance sharks. The legal system is clogged with this gunk.

Is this a case for government intervention? A law requiring people to pay off one allowance before they get another doesn't seem onerous -- until you extend Daw's principle to regular banks and trust unions. Perhaps you should be required to pay off your Visa card before making a purchase on your MasterCard, or pay off one car allow before taking out another.

Daw would only target the opportunistic payday lenders, of course. But his bill raises a debatable about the appropriate limits of government. In Ohio, we've just seen a new extension of the nanny assert: An 8-year-old boy was taken from his family and placed in foster care because he was too fat.

The question is, When you let the camel's nose into the tent of single freedom, how far behind can the rest of the beast be?

Still, few would argue that the state has no obligation at all when it comes to the edict of banking and money. Usury laws were enacted to prevent exploitation. Perhaps this is one the reality that justifies intervention, if only because the status quo is costing the state a pile of money.

If the amenable payday-to-payday loan option were not available to low-income people, would the resulting productive adaptations by individuals be good for society at large? That is a good question to ask the Utah Legislature.

Source: Daily Herald