Ayn Rand Center Press Release
No Caps for Payday Loans
September 12, 2008
Washington, D.C.--Across the country, state lawmakers are capping the interest rates "payday lenders" can charge borrowers. According to supporters of these caps, payday loans are harmful to borrowers, trapping them in debt with allegedly exorbitant interest rates.
"The crusade against payday loans is unjust," said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights.
"Despite the demonization of payday lenders, they provide a valued service: they make it possible for low-income, high-credit-risk Americans to get their hands on cash quickly. Without such loans, many of these Americans would have to resort to leaving bills unpaid, racking up massive credit card debt, or worse. That's why they voluntarily accept substantial interest rates: they judge it to be their best available option.
"Contrary to the critics' intimations, interest rates for payday loans are not set by the arbitrary decree of lenders. Instead, they are determined by market forces and reflect certain realities, such as the fact that making small, short-term loans to high-credit-risk customers isn't profitable unless lenders can charge rates that reflect that credit risk. If it were possible to profitably offer such loans at a lower interest rate, competitors would enter the market and drive interest rates down.
"Caps on interest rates don't change these underlying realities. Rather, they make it impossible for payday lenders to operate profitably, driving them out of business and depriving their potential customers of access to desperately needed cash. The fact that some borrowers make unwise decisions and become mired in debt doesn't justify punishing lenders and responsible borrowers.
"It's time to end the war on payday lenders, and recognize their right to charge whatever interest rates they wish in their efforts to attract willing borrowers."
### ### ###
Yaron Brook is executive director of the Ayn Rand Center for Individual Rights. He is a regular contributor to Forbes.com and a contributing editor of The Objective Standard. His articles have been featured in major newspapers such as USA Today, the Houston Chronicle, the Chicago Sun-Times, the Providence Journal and the Orange County Register. Dr. Brook is often interviewed on radio and is a frequent guest on a variety of national TV shows, having appeared in the new Fox Business Network, FOX News Channel (The O'Reilly Factor, Your World with Neil Cavuto, At Large with Geraldo Rivera), CNN (Talkback Live and the Glenn Beck Program), CNBC (Closing Bell and On the Money), and C-SPAN. Dr. Brook, a former finance professor, lectures on Objectivism, capitalism, business and foreign policy at college campuses, community groups and corporations across America and throughout the world.
To interview Dr. Brook or book him for your show, please contact Larry Benson:
949-222-6550, ext. 213
For more information on Objectivism's unique point of view, go to ARC's Web site. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of "Atlas Shrugged" and "The Fountainhead."