Short Term Lending

Short term lending institutions (e.g., title loans, payday loans) have been under fire for a long time. Opinions regarding them range from banning them completely to eliminating any and all regulation. This page explores this topic and includes my current opinion.

My opinion: Short-term lending is a legitimate business and regulation if any should be minimal. The high-interest rates that make such institutions popular targets exist because of the high default rate. Eliminating them or regulating them out of business simply takes away one possible recourse before the poorest lose their home, car,... Without this recourse, some will feel they have no choice but to turn to loan sharks that operate completely outside the law. While the potential always exists for lenders to "sell" something buyers can't afford, you can't eliminate risk without eliminating freedom. Regulation should be focused on eliminating fraud, not freedom, and to help ensure clients have the education and maturity to make informed decisions.

References

• Payday Loans and Predatory Politicians
• Pay Day Lending Is Not Harmful to Low Income Borrowers