Would this bill cause payday lending to become unprofitable & no longer exist?
Healthy Person asked:
Currently in Ohio, the cap on payday loans is 391%.
In Ohio, Issue 5 on the ballot will put a cap on the interest rates to 28%.
Currently in Ohio, the cap on payday loans is 391%.
In Ohio, Issue 5 on the ballot will put a cap on the interest rates to 28%.
Arguments against this bill suggest that this would make payday lending unprofitable, and therefore cease to exist.
Do you think that theory is true? How likely is it that that could happen?
It depends on what the going rate is now. The cap doesn’t matter if it’s above the going rate. For example, if payday loaners typically charge 25%, that would suggest that 25% is a profitable rate. So if the cap is at 28%, it shouldn’t affect the availability. However, if the going rate is 35%, I would assume that the loaners would lose money at such a rate, and no longer provide loans.
However, not being an expert on payday loaners, they could be colluding or doing something else unsavory, and their profits are larger than they would be in an equilibrium market.