That maxim surely helped guide the deregulation of the fringe lending business in the 1990s-and some advocates still believe that further deregulation is the key to making payday loans affordable
There’s no single reason payday lending in its more mainstream, visible form took off in the 1990s, but an essential enabler was deregulation. States began to roll back usury caps, and changes in federal laws helped lenders structure their loans so as to avoid the caps.
Still, according to Pew, the number of states in which payday lenders operate has fallen from a peak of 44 in 2004 to 36 this year
Now, however, Avon Lake payday loan centers the storefront-payday-lending industry is embattled. In 2006, after much outcry about the upcropping of payday lenders near military bases, Congress passed a law capping at 36 percent the annualized rate that lenders could charge members of the military. In response to pressure from consumer advocates, many states have begun trying to rein in the industry, through either regulation or outright bans. Lenders have excelled at finding loopholes in these regulations. Nationwide, according to the Center for Financial Services Ined because the amount borrowed is due in one lump sum-barely grew from 2012 to 2014.
One problem with the payday-lending industry-for regulators, for lenders, for the public interest-is that it defies simple economic intuition. For instance, in most industries, more competition means lower prices for consumers. Yet there’s little evidence that a proliferation of payday lenders produces this consumer-friendly competitive effect. Quite the contrary: While states with no interest-rate limits do have more competition-there are more stores-borrowers in those states (Idaho, South Dakota, Texas, and Wisconsin) pay the highest prices in the country, more than double those paid by residents of some other states, according to Pew. Continue reading