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Source link: http://archive.mises.org/8112/payday-lending-rip/

Payday Lending, RIP

May 15, 2008 by

Ohio has effectively shut the door on payday lending. The state legislature — a bunch of nanny do-gooders — recognized the seen: the closing of 1,600 payday stores and the loss of some 6,000 jobs. But these same folks missed the unseen: the tens or hundreds of millions of dollars invested in these businesses; with investment losses to be suffered by many unknown Ohioans.

Of course, these losses are bound to ripple through Ohio’s rust belt economy, creating unpredictable effects.

These types of state interventions in the market reduce future investment in capital. An investor has to consider the consumer, the market, and the state. Of those three, the state has become the most volatile, the greatest unkown.

Payday lending is gone in Ohio. Current and future Investors in the state will have to wonder if the whims of the legislature have finally trumped property rights in the Buckeye State, with the state willing and able to alter ownership and control of property with the stroke of a pen.

Is Ohio any different from the troubled countries to our south? I am no longer certain that it isn’t.


Stanley Pinchak October 6, 2008 at 12:44 pm

If I decide to vote and give my implicit consent to the state, I guarantee that I will vote for individual freedom of contract and vote against issue 5 (and every levy increase while I am at it). Tough call. On second thought, I think I’ll probably just stay home and deny the state my consent. I have more important things to do than to taint myself with the dealings of the state. Plus my conscience will feel better for not being a willing participant in the unjustified force that the state wields against innocent subjects.

Christy November 9, 2008 at 9:32 am

The Payday Lending cap could prove to be a blessing in disguise. Many of the users of these types of loan are caught into a vicious cycle that they cannot break. I understand that alot of the individuals whom do in fact use these lenders are poor. But they are ONLY get poorer by being stuck in the cycle of “Payday Lending”

Will Riddle November 30, 2008 at 10:15 am

This is a completely ridiculous post. Take aside the moral questions around this kind of lending for a moment. Payday lenders do not create any wealth for the society. They reinforce irresponsible habits on the part of borrowers, and employ a whole class of people whose job it is to take money from them. They function economically like handlers or middle managers. Their elimination can only cause a net increase in productivity for the economy at large.

Stuart Thomas July 14, 2010 at 3:47 am

you need to understand these are businesses trying to provide a service, and they should be compensated for taking risks on people no one else will lend to…

Jer@PaydayLoanIndustryBlog.com August 4, 2010 at 11:27 am

Payday loan companies offer one more choice consumers can use to solve short term financial problems. It’s not always possible to access $200 – $500 to turn on the lights, fix the car enabling one to get to work, purchase medicine for a child… from a friend or a family member, a credit union or a bank.

When the “state” creates scarcity prices increase. In the case of Ohio, consumers will be forced to bounce checks (average cost $33.45), borrow at higher rates from payday loan Internet companies (often offshore), drive to neighboring states where PDL’s are available, steal, beg, or worse depending on how desperate they are.

Additionally, thousands of jobs are lost, investment dries up, commercial vacancy rates increase, the state loses licensing, compliance, and auditing fees, and on and on.

The answer is not to outlaw a specific business but rather to enable alternatives and competition to exist with really good disclosure of fees and rates.

ericcarlos111 November 30, 2010 at 5:09 pm

• The initiative taken for the concern is very serious and need an attention of every one. This is the concern which exists in the society and needs to be eliminated from the society as soon as possible.

Mortgage Loans

Joe Leto June 14, 2011 at 9:16 am

I think that it’s absurd for the government shut down so much business, when were supposedly trying to create jobs. A payday loan can be a great solution for a responsible borrower when they encounter a pressing situation. As long as they can repay it quickly, and do not rely on it as a long-term solution, there should not be any problems. People need to take responsibility for themselves.

Dianne Llanos June 28, 2011 at 7:05 am

I agree with joe leto that I’ts not that appropriate for the government to close many business when instead they need to open new job opportunities for the people who strongly need work. .

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