I was intrigued to see that John Oliver had DESTROYED (or possibly EVISCERATED or maybe even DECIMATED) the payday loan industry on his satirical news program this week. Given that roughly zero percent of the people who watch John Oliver's news program have ever actually gotten a payday loan, you can imagine my amusement with his denunciations and the righteous back-patting that the chattering classes engaged in while telling poor people how stupid they are for utilizing a service that they love.
Payday loans operate in a rather simple manner: You borrow a small amount of money (say, $100) and pay back the loan plus a set amount of interest (say, $10) a couple of weeks later. Make no mistake: $10 of interest on a $100 loan that lasts just a couple of weeks is really expensive. It's why critics of payday loans are able to throw around eye-popping figures like "zomg, 391 percent annual interest rates!" and the such.
This is, however, rather the wrong way of looking at things. Tossing around inflated APRs makes for good rhetoric but isn't really logical; it's like criticizing someone for renting a hotel room at $200 per night by pointing out that they're spending $6,000 per month, which is way more than you'd ever pay to rent a one-bedroom apartment! How much does a bounced check cost? $40, $50? If you don't have a credit card and you don't have the cash and your banking account is light—well, what are you supposed to do? Risk a $50 returned check fee? Or spend $10 to borrow some cash that will get you through to your next paycheck?
Perhaps the most inconvenient fact of all is that payday loan customers really like getting payday loans. The terms are easy to understand, the storefronts aren't intimidating, and the customer service is quite excellent. Ninety-five percent of payday loan customers say the government has no business telling them whether or not they should be allowed to get payday loans.
Of course, the whole liberal project revolves around telling people that they're too stupid to know what's in their best interest. The problem, though, is that the alternatives are no better, and may even be worse:
when payday loans are restricted, such customers generally turn to less-preferred, more-expensive alternatives, such as pawnshops or credit card cash advances, and ... overdraft protection.
So go on and sneer and crack your jokes and make life harder and more expensive for those you're trying to help. At least you've gotten the self-satisfaction of DESTROYING and EVISCERATING and DECIMATING a business you don't like and would never dream of patronizing.