Senseless comparison
The Salt Lake Tribune
April 19, 2009
by: Tim Miller
Judging two-week payday loans by an annual percentage rate standard is as senseless as comparing a hotel's nightly rate to a 12- month apartment lease ("Usury law: Tell it to Congress," Our View, April 16).
Is a hotel a "predatory hotel" because it charges $154 per night? That's $4,620 per month, or $56,210 per year! You can rent a studio apartment in most American cities for about $500 per month.
Using the same price cap proposed for short-term loans, the $154 room rate should be set at a maximum of $16 per night. A $16 price limit wouldn't be a ban, but it's hard to imagine many hotels staying in business with that kind of restriction.
Short-term payday loans are no different: The suggested 36 percent APR limit translates to a $1.38 fee for a two-week loan of $100 dollars. The limit effectively shuts down the short-term loan service business. But that does not solve the borrower's problem of needing a loan.
It does, however, leave them with the traditional, more- expensive alternatives, including paying for overdraft charges.
Tim Miller
Center for Consumer Freedom
Washington, D.C.
