It seems as if it’s soon going to be more challenging to get a payday loan from many of the more mainstream banks. I’ve written about this before (for example, here and here). I doubt limiting access will solve the problem. My guess is that it will make the problem much worse. Of course, what actually constitutes “the problem” is part of the issue. I don’t really think there is a problem since what you’ve got are buyers and sellers engaging in free commerce. And so regulating that can only possibly make one side or the other unhappy. But, if you think the problem is that poor people shouldn’t be able to gain access to paycheck funds in advance of receiving those paychecks, then yes, regulation probably makes sense and does “solve” the “problem”.

If you think there is a problem (whatever it is), then it’s almost certainly true that the problem is very complicated. To think that regulation in this complicated market can do anything other than make things worse for somebody is silly. Usually regulating these kinds of markets moves the markets underground, where the “victims” (in this case, you’re probably thinking the poor people receiving the loans are the victims) face even worse black market conditions.

-JD Cross

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