Payday Lending

Bernie Sanders' New Plan Will Make It Tougher for Poor People To Get Credit Cards

Sanders and Rep. Alexandria Ocasio-Cortez want to cap credit card interest rates. There will be unintended consequences.


One obvious truth that politicians have trouble grasping is that the best option in life for most people is sometimes not the best option for everyone.

Consider payday loans. Most people with stable finances and conventional banking accounts tend to avoid them. The rates and fees seem exorbitantly high when extrapolated out over long time frames, as critics tend to do.

These critics, most of whom would prefer to regulate the payday loan industry out of existence, argue that its rates are structured to intentionally confuse customers and that the business model is inherently predatory, trapping the poor in cycles of debt they might otherwise avoid.

These arguments suggest that people who choose to use payday loans don't, and perhaps can't, understand the choices they are making. For their own good, those choices should be prohibited by our enlightened, elected betters. It is a form of benevolent condescension built on the belief that poor people can't count.

Accounts of the lived experiences of actual payday loan customers indicate otherwise. In 2017, University of Pennsylvania Professor Lisa Servon published The Unbanking of America, a close look at people who lack traditional bank accounts, many of whom regularly use payday loans and check cashing services. During the course of her research, Servon worked as a teller at one such business for four months. What she found was that customers knew exactly what they were doing when they took out loans, and they usually had good reasons for doing so.

Many of them had previously had negative experiences with banks, in particular with overdraft fees, which tend to be higher than the rates charged by payday lenders when compared on an equal basis. Extended out over the course of a year (which is longer than the typical repayment period), a typical payday loan has an annual percentage rate (APR) of about 390 percent; over the same period, overdraft fees can range from 600 to nearly 800 percent. Bounced checks can result in effective annual APRs of more than 1,400 percent. Payday loans aren't cheap, but people with inconsistent cash flow often find that the alternatives are more expensive.

Servon learned that some payday loan customers needed cash more quickly than a bank would provide. Others valued the transparency of the pricing for various services. They weren't confused by the various fees and transactions; on the contrary, they found them clearer and easier to manage than what they encountered at banks. In many cases, they saw payday loans as less expensive than the available alternatives. Nearly all of them understood in fine detail exactly what their financial resources were, as well as their obligations, and worked to meet them as best they could, often in trying circumstances. The payday lending operation was widely liked and acted as a kind of community center.

Much of this was not obvious to Servon when she started the job. But in time, she came to understand that the lives of her customers were different from hers, and thus benefited from different options. As she told NPR in an interview about her experience, "All of these things that may appear irrational to those of us who haven't walked in the shoes of the people who are using these services, most of them turned out to be pretty rational decisions." The people she encountered were making tough choices in trying circumstances, but they knew quite well what they were doing.

Keep that in mind when someone like Sen. Bernie Sanders (I-Vt.) brags about having eliminated payday loans in his home state of Vermont, as he is today.

What Sanders is actually bragging about is eliminating choices—choices that may seem unfortunate or unpleasant to the sort of people who, say, own three homes and write bestsellers that make them millionaires—but which often benefit the people who make those choices: lower-income people with less stable finances. In essence, Sanders is proud of having eliminated useful financial tools for the poor.

And he and his fellow democratic socialist, Rep. Alexandria Ocasio-Cortez (D–N.Y.), are now proposing to do the same thing again, by capping interest rates on credit cards at 15 percent. Currently, the median interest rate for credit cards is a little more than 21 percent. Borrowers with good credit typically pay about 17.7 percent, while those with lower credit scores pay about 24.9 percent, according to The Washington Post. Capping rates on payday loans in Vermont effectively eliminated the industry; capping rates on credit cards will have a similar, if more limited, effect, making it much harder for those with low credit scores—which is to say, people who struggle financially—to access credit.

And if history is any guide, that means they will turn to other, potentially worse, options. Reports on payday loans return again and again to overdraft fees on checking accounts, and the costs they can impose on people with tight budgets. Research also shows that when payday lending goes away, pawn shops proliferate. Eliminating these services by regulating them out of existence doesn't eliminate the demand for these sorts of financial products; it just pushes the people who need them to instead sell their most valuable possessions at a steep discount. 

Sanders and Ocasio-Cortez have at least anticipated this argument, and proposed a solution, which is that the U.S. Postal Service should effectively be converted into a bank, offering savings and checkings accounts.

This is not a new idea, but it is a bad one. The Postal Service lost nearly $4 billion in the 2018 fiscal year, an increase of nearly 44 percent from the prior year. Even before then, the Government Accountability Office, which sometimes seems to exist mainly to document how other parts of the government are failing, warned that a "comprehensive package of actions is needed to improve USPS financial viability." This is a polite way of saying that it can't meet its obligations, and needs a bailout to survive. Sanders and Ocasio-Cortez, in other words, would push people into a financial relationship with a failing institution that has deep fiscal problems. Somehow, this is supposed to be an improvement.  

The legislation isn't likely to pass. But Sanders is keen to defend it anyway, and he has already dismissed opponents of his legislation as tools of big banks. "I am sure it will be criticized," he said. "I have a radical idea: Maybe Congress should stand up for ordinary people."

Here's an even better idea: Sanders should stop thinking he knows what's best for everyone else, and let ordinary people make decisions for themselves.

NEXT: Nobody Actually Knows Very Much About Trump's Business Dealings

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  1. 15%? Outrageous! Might as well borrow from the mob!
    2% is a reasonable amount.

    1. If payday loan stores go away and credit card rates are capped the Mob may be your only choice.

    2. Then you should offer a 2% credit card and show us how you make a profit.

    3. 2% is a living interest rate!

    4. What is this the 15/15 plan? $15 minimum wage and 15% interest rates.

      1. What happened to the 9/9/9 plan?

  2. Life is so much simpler when you have faith in people to handle their own affairs and to be held accountable when they screw up. Everybody makes bad decisions once in a while; that's how we learn to not make the same mistake again. I've lost friends who thought that hints would get me to volunteer to help or even "lend" some money; but those are friends only when they are needy.

    (rhetorical question coming up)

    Why can't politicians ever have faith in people? Why do they always assume other people are gullible, naive and stupid?

    1. It's called projection, alphabet.

      1. Huh. I called it rhetorical.

    2. Well, since that assumption seems prevalent among democrats, maybe it is because that is how they see those gullible, naive, and stupid enough to vote for the democrats.

      1. People without bank accounts tend not to vote.
        People who vote for Democrats do it because they think the Republicans are bad people, or because they want to feel good about doing something to help poor people (even if the things they are doing are counterproductive).

    3. Well, a lot of people are gullible, naive and/or stupid.
      But setting up the world for that kind of person is just going to produce more of that kind of person.

      1. Zeb: That is precisely the plan. Gullible, naive, and stupid people are so much easier to control and will believe any propaganda their political party tells them.

  3. There will be unintended consequences.

    Yeah, no. Denying the poor access to credit is intended to keep them dependent on government.

    1. What else can it be?
      Bernie will use a similar argument for guns as Maduro. He will be doing it(confiscating guns) to keep us safe.

      1. Payday loans for all -- why can't the government provide them at 5% interest?

  4. If we let the Post Office take on banking, we should fund the initial operations by a 200% tax on all funds in politicians campaign chests. For ongoing operations, 200% tax on political contributions.

    1. I like it will that include Gigglesbrand's $600 that she will be taking from our taxes then giving back to us to give to other half wit politicians.

      this gets better everyday

    2. We had postal savings accounts from 1910 or so until the 1960's. Banks hated it and lobbied against it and prevented them from offering anything beyond Xmas club or CD type service. Which is why when interest rates started rising in the 60's, the demand for the service shut down.

      the Sanders type proposal is abhorrent and doesn't even fit the model that most other countries have had re post office financial stuff for the last 200 or so years (and yeah - pretty much every developed country has something like this and has since before stamps were invented). But because he's the only one speaking, his proposal is the only one that 'sets the agenda'. In the meantime, 93% of post offices that close are in lower-income neighborhoods - while banks can seriously propose shit like negative interest rates and 'let's get rid of cash'.

    3. the lines at the post office are way too slow already.

  5. That's why we shouldn't have private lending altogether. It just doesn't work in a free market.

    1. Time for CreditCare, by the fiscally responsible people running MediCare.

  6. What Sanders is actually bragging about is eliminating choices

    He's going to get those deodorant companies if it's the last thing he does!

  7. Excellent idea. Outlaw banks, and make all citizens process their finances through a federal government controlled agency, the Post Office. (yeah, I know all about how they are independent. So is the democrat Bernie, in theory). Then we can track everyone so much easier, and cut them off if they wrongthink.

    1. the idea of the Post Office running a savings and loan would be comical if not sadly tragic

      1. I can imagine it building up a huge portfolio of bad loans which liberal politicians will want to 'forgive' using the taxpayers' money.

      2. The PO making private loans is truly a crappy idea. But serving as a distribution alternative to the NY Fed for short-term T-notes? That is not only constitutional, it would save probably $50 billion/year in interest paid - because COMPETITION WORKS.

        And it is easy/fast to put in place too - and has been done in every developed country. the UK Post Office was actually the first 'bank' to go to an electronic-checking model in the late-1960's. Just set up a deposit system (with debit cards for those who don't want to use cash - or hell monetize silver coins again for those who want to use cash) - pay no interest - and fund that entirely with existing T-notes. The operational stuff could be contracted out (and banks would line up to put in bids), the post offices already exist everywhere, Treasury auctions wouldn't be limited to whatever the NY broker-dealers offer - which means funding costs would drop.

        1. yeah, sure, the post office will make everything so much better

          1. Like it or not, the ability to USE the money that one actually has as property is a fucking property right. The most basic property right that exists. If you can't even USE your own property then you don't actually fucking own it. It is an obscenity that so many self-proclaimed 'libertarians' pretend that economic property rights do not apply to the marginal.

            I'm not talking about 'credit' or 'loans' or any such thing. I don't question that simply handing the function over to bureaucrats at the Post Office is no solution at all. I am saying that libertarians should stop exclusively acting as the Koch-suckers of the donor class. And actually use whatever tiny brains you twits have to think about ACTUAL FUCKING PROPERTY RIGHTS.

  8. I'm a free market guy, but I'm not going to lose much sleep over usury laws. The odd thing is that usury laws have been around forever, but now they no longer apply to credit card companies, so they can charge 25 and 30% interest. Then you have the payday lenders as well.

    1. So not really much of a free market guy after all.

      1. I am, actually. Most likely you just lack perspective due to abject ignorance.

        1. What, compared to Bernie? You'd allow 10 or even 15 different kinds of deodorants?

        2. "I am, actually."
          Not according to your earlier post you're not.

          1. Wrong. I didnt say I support this idea. Just that its negligible in perspective.

            1. "Wrong. I didnt say I support this idea. Just that its negligible in perspective."
              You claimed to support a free market and then immediately retracted that support.
              And then accused those who noted that you did so of "abject ignorance".
              So you've proven yourself to be a hypocrite and some sort of authority regarding the issue, absent any supporting data.
              Would you like a new shovel to dig a deeper hole?
              Or, more succinctly, how stupid are you?

              1. I said I wouldnt lose sleep over it. Apparently you are hysteric about it. To each his own.

                1. Millennial Lawyer
                  May.10.2019 at 12:20 am
                  "I said I wouldnt lose sleep over it. Apparently you are hysteric about it. To each his own."
                  so freedoms are something dombulbs like you are willing to give up,, 'cause dimbulbs like you are dimbulbs?
                  Did I get that right, dimbulb?

                2. Let me be clear about this:
                  The claim that an ignoramus is 'not going to lose sleep' over the governement's denial of a freedom makes it quite clear that an ignoramus is a fucking lefty ignoramus.
                  Just want to make sure: Is that clear, fucking lefty ignoramus?

                  1. Well, he admits to being a "millennial" and a lawyer, if that doesn't scream ignoramus, IDK what does.

            2. you mean it doesn't apply to you, and you don't care about other peoples' freedom

    2. Is this kind of like saying, "I'm a big 2nd Amendment supporter BUT..."?

      Guys like that really don't support the 2nd Amendment. Likewise, you're not really a "free market guy". Sorry.

      1. Well, eveything is relative I guess. This site seems to be filled with delusional open borders lunatics so I'll be whatever you want, even though I'm a bigger free market guy than 98% of people.

        Anyway, this is nothing like your 2nd amendment example at all.

        1. Millennial Lawyer
          May.9.2019 at 10:31 pm
          "Well, eveything is relative I guess...."

          You bet! Like the dumbulbs who show up and say they support free speech, but....
          Congrats! You've just joined a not-at-all select group of dimbulbs.

          1. Im close to a free speech absolutist. You do realize that free speech and gun rights are the first and second amendments, right? While regulation of interstate commerce is an enumerated power? Do you equate these areas in your polotical theory?

            1. Oh, boy! Just what I wanted this evening!
              Millennial Lawyer
              May.10.2019 at 12:11 am
              "Im close to a free speech absolutist. You do realize that free speech and gun rights are the first and second amendments, right?"
              They are both mentioned there and are freedoms regardless of that.

              "While regulation of interstate commerce is an enumerated power? Do you equate these areas in your polotical theory?"
              Uh, did being a millenial mean you are stupid enough to post that as a comment?

              1. "They are both mentioned there and are freedoms regardless of that."

                Inalienable rights endowed by the Creator you mean? Yeah I'd agree with that.

                Charging usurious interest rates is not an inalienable right endowed by the Creator.

    3. Banks can also charge unlimited interest rates if they call it a loan origination fee or "points". Try to get a one-month $500 loan from a bank - either they'll sell you a credit card with an (according to Sanders) outrageous interest rate, perhaps 24% plus fees, or they'll charge $200 up front for the credit checks and paperwork to approve the loan - and that's 2400%. And of course, "overdraft protection" costs more than a payday loan to avoid that overdraft - even before the bank shuffles the order of paying the checks so as to make as many checks bounce as possible.

      Maybe payday loan companies aren't paying enough in bribes, I mean "campaign contributions" as compared to banks?

    4. I hear that. Far better to let Dem looters run usurers ragged than to have them dreaming up carbon taxes and regulating power plants the way God's Own Prohibitionists regulate meth labs.

      1. Exactly right. The Dems want to kill the energy industry, nationalize the health care sector, confiscate guns and strip away free speech. We should rejoice if they busy themselves with usury laws.

  9. please do not call the consequences unintended. Predictable consequences are not unintended.

    1. Their intention is to stick it to the banks.

      Their intention is to demagogue.

      I suspect they genuinely believe that capping interest rates will help the poor by taking less money out of their pockets in the form of interest.

      If they were just spouting horseshit they didn't believe, that would make them less dangerous.

      1. Their intention is to socialize banking for poor people by having the post office do it, giving people with bad credit below market rates on unsecured loans, then force the taxpayer to bail them out when they inevitably default, thereby showing the goodness of big government.

        1. Hmm...loaning money to people, that everyone knows won't be able to pay it back, seemed like such a good idea, in the 2007-2008 period, that the AOC's and the Bernie-bros want to bring it back.
          What could go wrong?

    2. ^^This.

  10. "Sanders and Rep. Alexandria Ocasio-Cortez want to cap credit card interest rates."

    If it's between Sanders and Trump, there's no point in using our libertarian registered votes to protest socialism when we could use our votes to prevent socialism from getting into the White House.

    1. I just vote for the best candidate and let someone else count them. Last time that was Gary Johnson.

  11. It figures. Do this and make it harder for poorer people to have access to credit services. Same as raising the minimum wage to an artificially high level, and keep poorer people out of jobs. Seems to be the profile, because then you make these people dependent on government services and welfare programs.

  12. Sanders and Rep. Alexandria Ocasio-Cortez want to cap credit card interest rates. There will be unintended consequences.

    I think they're smarter than that. Cap interest rates and poor people with bad credit ratings will have no access at all to credit - and here comes Bernie flying to the rescue with a plan to force banks to loan money to poor credit risks just the same as good credit risks. And if the big, evil, greedy banks won't do it, maybe a government program to establish community-based organizations to do the lending. Isn't that how the 1995 update to the CRA worked to put poor people into homes they couldn't afford? And didn't a thousand Jessie Jackson wanna-be's get rich fronting the community-based organizations?

  13. Comrade Sanders is just trying to help the poor so they don't make unnecessary purchases on a credit card.

  14. Good news: Charges dropped against "I Eat Ass" Guy

    A Florida man who was arrested for refusing to remove a sticker on his car that read ‘I eat a–‘ had all charges dropped against him on Thursday, officials said.

    Dillon Shane Webb, 23, was informed by state prosecutors that the evidence against him does not warrant prosecution and Webb has a valid defense under the First Amendment.

    1. Link is hier.

      1. WTF? Why can't I post a damn link now?

        1. If it's about eating ass, I don't want to see it.

          They may have put some filters in place in the wake of that jackass, Shrike's Buttplug, after he apparently linked to you know what.

          1. Nah, it was just a link to a NY Post article. They even has the word "ASS" blurred out in the accompanying photo.

  15. Oh, and one thing that drives me crazy every time I see democratic socialists do this . . .

    On the one hand, the American people are so smart that they should own and run industry by way of democratic socialism. On the other hand, they're too stupid to make choices about their own exposure to debt?

    It's the same contradiction as when they say that people aren't smart enough to invest in the stock market to finance their own retirement. One of the essential components of socialism is government ownership of the means of production. Stock ownership in a capitalist society lets people own the means of production. But that's a terrible thing to do to the American people! They're not smart enough to make those kinds of choices!

    . . . that's why we should have democratic socialism?

    If democratic socialism doesn't trust the American people to make choices about how industries are run, when to hold 'em, and when to fold 'em, etc., in a capitalist system, then why is that different under democratic socialism--when the American people are supposedly making the same kinds of choices?

    I suspect the democratic socialists don't really give a shit about the democratic part at all.

    1. "I suspect the democratic socialists don’t really give a shit about the democratic part at all."

      Pretty sure that's tossed in as a sort of red herring.

      1. I suspect it's a matter of hoping the voters elect, and submit to, the right sort of rulers.

        To stay democratic, of course, the democratic socialists would have to accept the possibility of electoral defeat if they ever get into power.

        One way to work around that is to create new programs to make the people dependent, so that breaking the dependency would provoke anxiety and at least temporary pain (well-covered by socialist sympathizers in the media). With this sort of ratchet effect, politics devolves into a contest among different flavors of socialism (socialists aren't like deodorant, you can have different brands).

        1. "In ancient Rome, the Roman government used the term Cura Annonae ("care for the grain supply"), in honour of their goddess Annona, to describe the import and distribution of grain to the residents of the city of Rome. Rome imported most of the grain consumed by its population, estimated to number one million people by the second century AD."
          It's Wiki, which is not really a source, but it's the easiest one to find an explanation of the pandering and proved actual sources if you prefer.
          BTW, and AFAIK, other than wine and the technology of road and viaduct construction, Rome never provided goods to sell. Both of those had no buyers and other than that, Rome simply sucked value from the colonies, offering nothing in return.
          Buying votes by establishing dependency has a history both long and pathetic.

          1. In ancient Rome there was a fine line between 'buying votes' and 'placating the mob so that they did not tear you limb from limb.'

            Remember, other than the Emperor's guard, there really wasn't much in the way of a city security force. The wealthy sometimes had armed guards, or some slaves armed with clubs, but both of those could quickly prove double edged.

            Shit could get real there in a heartbeat.

          2. Both of those had no buyers and other than that, Rome simply sucked value from the colonies, offering nothing in return.

            Appreciate your analysis. But one question -- and maybe I'm just not understanding correctly: Wouldn't you count the Roman administrative state as well as its territorial protection as values provided to its colonies?

  16. "In Texas, the average annual interest rate on a payday loan is 661%.
    In Vermont, the payday loan industry doesn’t exist, because interest rates on small dollar loans are capped at 18%."

    Thank goodness there's New York and New Hampshire for those who need quick money.

    1. When is Reason going to implement a "Like" button?

      1. We're libertarians here -- don't expect Reason (wish I could) to enact your labor for you. Here's a homemade like button for you:


  17. Stupid people propose stupidity. I am the shocked.

  18. As I understand it, the states aren't allowed to regulate credit-card interest rates because of various legal complications. Interstate commerce, I think. Anyway, Congress could just kick the ball back to the states and we'll see whose usury laws make most sense.

    For the real hard cases, Congress should make bankruptcy available.

  19. […] Reason, Peter Suderman explains why “Bernie Sanders’ New Plan Will Make It Tougher for Poor People to Get Credit Cards.” The arguments proffered by Senator Sanders and his House co-sponsor, Rep. Alexandria […]

  20. OT -

    Brian Sims, the rageoholic Dem state legislator who offered money to dox some prolife teenagers, may be in trouble.

    The media isn't defending him, instead they're trying to both-sides him.

    1. You'd think a libertarian publication might find a government official using his position of power to threaten otherwise peaceful protesters to be newsworthy.

      1. Probably too local.

  21. Bernie's next plan is to force hotel rooms to cost no more than 120% of the median rent in their county.

    That means somewhere between $15-40/night, pretty much everywhere.

  22. Well to be fair, he also plans to tax the wealthy into poverty so in effect it will be a universal feature/bug.

  23. Foreseeable consequences are not unintended.

  24. They - and their supporters - truly are interventionist and paternalistic idiots.

    Will they cap interest rates charged by the government with late fees too? Those tend to be pretty damn high for a bureaucracy.

    Interest is one of those magical things people don't grasp. They think, for example, banks set interest rates. In fact, it's a highly complex and intricate process reflecting human financial activities.

    For example, credit card interest is high, in part, because of fraud.

    Know what? I say put a statement in front of McMarxist from the Bronx and Grandpa Gulag. If they don't know how to calculate interest charged they have no business talking about it.

    That's all they're good for. To cap, ban and tax.

  25. If this passes, then the next national emergency will be banks refusing to lend to blacks and hispanics.

    1. Now you're getting it. All problems are solved by an increasing number of laws to mold society into their vision.

      What could possibly go wrong?

  26. Another Lefty making up problems.

    Some credit card companies offering high interest rates is not a problem. If there was no market for these high risk credit cards, then there would be no customers. There are customers because some dum-dums refuse to learn anything about how credit works.

    1. And because you can use a credit card without paying interest. I keep my charges reasonable so I can pay it off in full every month, and never have to pay interest. Nor have I paid any fees on my CC in 20 years. The issuer makes a reasonable return from the fees paid by merchants on each transaction - and that is sufficient for them when it comes with essentially zero risk of losing money if I never pay off the balance. I don't have to carry large amounts of cash when I go shopping, and the merchant has less cash to count, deposit at the bank, and worry about being stolen.

      The basic thing most politicians don't understand about economics is that voluntary transactions must be win-win or no one would enter into them. That tells you what sort of world the politicians live in...

  27. Suderman is 'worried' about the unintended consequences.

    Libertarians are more alarmed by the intended consequences.

  28. Bernie Sanders' New Plan Will Make It Tougher for Poor People To Get Credit Cards

    Good! Poor people right now only get credit cards because of market-distorting regulations in the first place which encourage poor people to stay poor and wealthier credit card customers to pay higher rates.

  29. ""But in time, she came to understand that the lives of her customers were different from hers, and thus benefited from different options.""

    That's something AOC and Sanders don't understand or care about. They are authoritarians who thinks we world should live their standard.

    They are fairly popular in AOC's district. I can't think of anything that she has done for her constituents except help run 25,000 jobs away. If she succeeds with this, it's another feather in the cap for saying F you to the people of her district. Her losing the next election will be a predictable consequence.

  30. The main mistake is throwing out annual interest rates for loans that are supposed to be repaid quickly- hence the “payday” in the name of the loan. That’s like if a stay in a hotel room is $100 a night, going out of control and screaming “That’s $36,500 a year for housing!” You’re not moving into the Marriott.

    1. Nice analogy.

  31. Clearly everything should have an arbitrary, populist price cap. From now on no lunch should cost more than $3, no beer should cost more than $2, and no airfare (oops, sorry I forgot--trainfare) should cost more than $20.

    What a wonderful future awaits us!

    1. How about a price cap on prostitution? Plus anti-hoarding legislation for women's private parts? I wouldn't know myself, but I suspect a lot of straight men would support that.

  32. They don't care. Don't you get that?

  33. How is charging poor people higher interest rates helping them? Why should the rest of us (who aren't in the loan business) be encouraging poor to get themselves further into debt?

    1. Because they're the only option available to them.

      If you eliminate the services which are allowed to reasonably account for the risks they are taking, then the services which aren't so allowed simply won't serve the poor at all.

      1. "simply won’t serve the poor at all."

        Surely one doesn't service the poor by encouraging deeper indebtedness. High interest loans serve the rent seekers. Debt puts the rest of us into servitude.

        1. A payday loan is paid off with your next pay check. The only way to get into long-term indebtedness on payday loans is to borrow again on _every_ paycheck, and every study of how people actually use payday loans shows few do that. This may look like a bad choice to someone with a $15,000 limit on their credit cards or friends and relatives that are willing and able to loan money, but when someone with no credit has an unexpected expense, all choices are bad, and payday loans are often the least bad.

          Say you need a couple of hundred dollars to fix your car so you can get to work. You can:

          --Take out a payday loan, get your car fixed, pay your bills, and struggle next month to make it on what's left of your paychecks after paying off that loan.

          --Not fix it, take hours to get to work on the bus if it even comes within a few miles of home and work, impose on your friends to give you rides, and eventually lose your job when arrangements fall through.

          --Take the money needed to pay utility bills to fix your car. Then the heat is disconnected, and you'll need several hundred to get it turned back on.

          --Bounce a check (if you have a checking account), which will cost you much more than that payday loan, and may put you in jail.

          --Borrow from your friendly local gangster. Now the collateral isn't your next paycheck, but your kneecaps - and yet people do get desperate enough to do this.

          1. "Say you need a couple of hundred dollars to fix your car so you can get to work. You can:"

            I'd say better than any of these choices you offer would simply be to go to your employer, the one whose paycheck you are waiting on, and ask for an advance. Much better than relying on friends, relatives or loan sharks as you suggest,

            1. So, turn your boss into an interest-free lending institution.
              Yeah, that'll make you're secure in your employment future.

              1. "So, turn your boss into an interest-free lending institution."

                Sometimes a boss has to sacrifice to keep a hard working employee happy. In any case, if you've got a job that doesn't pay enough to see you through the end of the pay period, perhaps job security shouldn't be a priority. You can't borrow your way into financial security, no matter what the loan sharks say. Indebtedness means less freedom, more servitude.

      2. The market is so distorted that it's difficult to argue that pay day loans under current conditions reflect efficient market pricing.

  34. Reports on payday loans return again and again to overdraft fees on checking accounts, and the costs they can impose on people with tight budgets.

    Simple fix: make overdraft fees illegal too! Can't you see the way to help poor people is to make financial activity impossible?

  35. I have a radical idea: Congress should get its own fiscal house in order before trying to tell the banks and the credit card companies and the payday lenders how to run theirs.

  36. I read the comments on Bernie's Twitter account. It's what I expected it would be.

    They seem to think this is principled and 'sticking it to the bank' and 'predatory interest' but miss the point of a) it's just another option for people and b) capping it hurts the people who need that service most as explained in this article.

    In other words, 'out of sight of mind' for the people who need this service the least. As long as they get to pretend this bad idea makes them feel good.

    They're not thinking about the consequences at all.

  37. The prediction is made, and the way to test it is to let the looters cap interest. Talk to me offline if you want good odds on my wager that the credit card companies will shriek, wail and whimper like it's the end of the world. Before you bet, consider the indentureship of starveling Eurotrash signing indentureship contracts in exchange for passage to America. When it came time to bleed them white, the colonial government simply refused to enforce the contracts. Refusal by the political state to help corporate usurers exploit ignorance of mathematics is the refusal to initiate force in furtherance of fraud.

  38. Here's an even better idea: Sanders should stop thinking he knows what's best for everyone else, and let ordinary people make decisions for themselves.

    Pfft... yeah right. This is a country whose people chose Donald Trump to lead them because of Mexicans. Sorry, I prefer the clearly superior alternative... namely, a dictatorship of the proletariat. Can we expect these dumb poor rubes to even dress themselves correctly?

  39. Gee, how can anyone make any money in this world by getting $115 back from someone when they give you $100? Damn socialists don’t know nothing.

  40. […] Service expand its losing business into new areas. An overhaul of banking and credit card systems floated this week by Sen. Bernie Sanders (I–Vt.) and Rep. Alexandria Ocasio-Cortez (D–N.Y.) […]

  41. I agree that 15% is much too high. Should be prime rate +2% or something like that. Slam in the financial and stock transactions taxes too. Fuck the banks. Oh, and break those fuckers up.

  42. […] Service expand its losing business into new areas. An overhaul of banking and credit card systems floated this week by Sen. Bernie Sanders (I–Vt.) and Rep. Alexandria Ocasio-Cortez (D–N.Y.) […]

  43. In the Netherlands we used to have the "Postbank", which was a bank ran by the national post, meant as a cheap alternative to commercial banks. This turned out not to work, and this activity was sold to the ING bank 20y ago.

    It was cheap, but the service was horrible to the point it was unworkable. Plus the costs to taxpayers due to bureaucracy was ridiculous.

    If the small & rich Netherlands couldn't make it work I can't see how it can possibly work in the US...

  44. Bernie, Bernie! You are such a fool. Maybe yo should start wearing a harlequin outfit, or at least a harlequin power tie. It suits your performances.

  45. If it becomes difficult for the poor to get another loan, will they be more likely to be against the government taking another loan?

  46. […] Peter Suderman observes at Reason, one likely effect of the socialists’ proposal is credit card issuers […]

  47. […] Opponents of the legislation argue it would hurt low-credit consumers by limiting their ability to access credit. As American Bankers Association spokesperson Jeff Sigmund argued: […]

  48. […] “Bernie Sanders’ New Plan Will Make It Tougher for Poor People To Get Credit Cards,” by Peter Suderman […]

  49. […] Bernie Sanders’ New Plan Will Make It Tougher for Poor People To Get Credit Cards Peter Suderman, Reason […]

  50. […] with unestablished or bad credit—e.g. people struggling to recover from financial hardship. As Reason’s Peter Suderman observed, research on state-level usury laws shows that regulating this industry […]

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