Well meaning zealots continue to attack payday lenders for usurious interest rates.

They are missing the point.

The high interest rates charged by payday lenders and their peers seems excessively high.  We might all agree on that.  But the question should really be, ‘what drives people to these businesses in the first place’?  One doesn’t have to investigate very deeply to discover the answer to that question.

In South Dakota, the record will show that when legalized gambling entered the state it was followed by a significant increase in the number of pawn shops, automobile title lenders and payday lenders.  The number of casinos have produced the “need” for the high interest lending businesses.

Are we really “protecting” people who are subjected to high interest rates by regulating the rates that can be charged?  If we ignore the underlying problem that drives them there in the first place, we haven’t done much about solving the real problem.  If the casinos across South Dakota were eliminated, there would also be a corresponding number of closures of pawn shops, title lenders and payday lenders.

If regulating interest charged by business is so important, perhaps these crusaders should look at some of the practices of State government, such as charging 10% per month for excise tax payments that are late.  Maybe a look at excise tax itself would be a good thing.  Why would the people who are so intent on “protecting” the consumer be the same ones who have supported millions, millions and more millions of dollars in new taxes over the last several years?  It is so much more noble to attack and regulate businesses than it is to do the work of making government fiscally responsible.

A few years ago, two organizations I run operated a thrift store.  We went through the process of licensing to provide a pawn shop, and were preparing to do payday lending.  Our intention was to provide these services at a significantly reduced rate of interest, in hopes of helping those who needed them.  Even though we had customers wanting to pawn and/or borrow, we never did one transaction.  It just didn’t set right, even at much lower rates.  The question had to be asked, “Are we really HELPING these people?”

If legalized gambling is creating the problem, then payday lenders, regardless of the rate, simply enable people to continue in a destructive life pattern.  Legalized gambling and increased taxes impact people much more negatively than payday lenders.  The lenders are a symptom of the problem.  A consequence of bad choices by government that make life more difficult for people.

If these “champions” of the disadvantaged really wanted to help, they should stop voting for higher taxes and eliminate legalized gambling.

***Gordon Howie is an author and CEO of Life and Liberty Media***

“It’s not about right or left, it’s about Right or Wrong.”

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