WSJ: Payday fees reasonable compared to credit-card & bounced check fees

Today’s Wall Street Journal had a great Editorial that outlined how misguided government targeting of the payday loan industry is when it serves so many Americans.

Some excerpts:

“Payday lenders charge around $15 for a two-week $100 loan to their typically high-risk borrowers, which equates to a 390% annual interest rate. Consumer groups like the liberal Center for Responsible Lending call this “predatory,” but the terms are reasonable compared to an average credit-card fee, which can exceed 900%, or a bounced check fee, which can top 1,500%.”

The column also illustrated the important point on what happens when payday lenders are regulated out of business:

“A clutch of Internet lenders base their businesses offshore or on Indian reservations to evade state regulators, and that’s where many abuses occur. By contrast, large, publicly traded companies belong to industry associations and don’t want to court bad publicity with bad practices. Advance America, one of the largest lenders, had about 100 complaints filed with state regulators in 2011—out of more than 10 million transactions.”

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