“With a crackdown on payday lenders, subprime borrowers are increasingly using auto title loans, whose high interest rates can lead to repossession and financial ruin.” [DealBook/NYT] Todd Zywicki at Volokh finds much lacking in the article’s analysis: “it turns out that those who use these products are not as stupid as the Times’s reporters imply they are.” Reihan Salam: “Remember when people said that cracking down on payday loans would have regrettable consequences?”
One Comment
I will reserve judgment on the civilian market, but the crackdown on high-interest loans to the military was a good idea. Instead of taking second and even third jobs to try to pay back debt they can’t afford, military members are diverted early to their commanders and base social services, who can help them get loans from credit unions and advice on how to set up a budget they can live with. Soldiers are a good risk for base credit unions, because borrowers know their bosses will make life unpleasant for them if they default for dubious reasons.
The credit union model should be promoted by the Feds for the millions of “unbanked” outside the military, providing a free (no bank fees) and safe way to save enough money for the sort of emergencies currently covered by payday loans. In addition to savings and withdrawal, subsidized free Federal accounts might provide debit cards, but not checks or credit cards.