Ohio lawmakers sent a resounding message to their constituents on Wednesday: Consumers capable of opening a checking account can’t act like adults when it comes to managing a three-figure loan. By voting to cap annual percentage rates on payday loans at 28 percent—an effective ban on the industry—the State Senate has opted to ignore the interests of an estimated 6,000 employees and untold numbers of Ohioans in need of a short-term loan.
But as a Zogby survey of Ohio consumers confirmed this week, most people don’t want the government’s “help” in managing their debt problems:
A huge majority – 84% – said they believe the individual citizen should be free to make their own decisions about what kind of credit they can use, and 70% said the government should not be in the business of telling adults who have bank accounts that they cannot get a payday loan if, in their own opinion, people feel that payday loans are the best option for them.
Though paternalist bureaucrats (like those in the Ohio—not to mention Arkansas, Colorado, Virginia, and South Carolina) claim to be helping payday lending customers by abolishing the practice, individuals who have had problems with the service have said they blame themselves, not the industry. Researchers from the University of North Carolina conducted a focus group of payday lending customers and concluded:
“Overwhelmingly, participants did not blame the lender or the loan but rather themselves for their situation.”
Banning payday lending (or capping interest rates so low as to prohibit businesses from making enough money to operate) won’t do anything to address the debt issues that create the need for these short-term loans. That debt will remain even after payday lenders are regulated (or sued) out of existence. As the UNC survey found, only 15.6 percent of payday lending customers surveyed said that banning payday lending in North Carolina had a positive effecton their households.
Americans don’t want their money managed by paternalist politicians. And the Ohio Senate’s move to annihilate the payday lending industry could set a dangerous precedent. There’s no end to the list of things lawmakers could take away from everyone because some people misuse them – cars, power tools, cupcakes, anything. This lesson from government will only erode personal responsibility, to the detriment of a healthy society.