Payday loans are short-term loans at what amount to high annual interest rates to people without other access to immediate credit. A New York Times writer is all hot and bothered about that, calling it “predatory lending.” Undoubtedly, he has never been badly in need of money and lacking in good alternatives. You can’t make people better off by taking options away from them, but that is just what the liberal elitists at the Times want to do. In the letter below, economics professor Don Boudreaux skewers the editorial writer:
Editor, The New York Times
620 Eighth Avenue
New York, NY 10018
Dear Editor:
Appalled by “payday loans” – small amounts of money lent by private creditors charging high interest rates to poor people in need of liquidity – Thomas Edsall concludes that “In the current political climate, there is little prospect for a major initiative to improve life chances for those at the bottom. But there is more we can do: enact restraints on predatory lending” (“Making Money Off the Poor,” Sept. 24).
Not so. If payday lending really is the stupendous source of easy and unfair profits that Mr. Edsall supposes it to be, Mr. Edsall himself can immediately improve the lot of the poor by entering this line of business. With average loan amounts of $350, Mr. Edsall and his many smart and caring colleagues at the Times can easily scrape up enough money to lend at far lower rates of interest to thousands of customers seeking payday loans.
If Mr. Edsall’s economics is correct, he will not only earn profits from his lending activities (and thereby become able to extend even more loans on less “usurious” terms to the poor), he will also, without any government intervention, kill off with his better financing terms the “predatory” lending practices that he despises. And he’ll achieve these happy outcomes by expanding – rather than by restraining (as he now proposes to do) – the ability of poor people to choose to borrow for short-term financing needs.
Sincerely,
Donald J. Boudreaux
Professor of Economics
