When the sign for one of those payday lending stores went up on the corner a block away from my house, I have to say I was less than enthusiastic.
The standard response in a market economy to “market failure” is for a nonprofit to fill the gap in services or meet the need. Today’s NYT reports on efforts in the short-term loan industry to meet that need. As it stands in the market system, “Payday loan stores, which barely existed 15 years ago, now outnumber most fast-food franchises. Typically a customer borrows a few hundred dollars in exchange for a check, postdated to the next payday, made out in the amount of the principal plus a fee of $15 to $22 per $100 borrowed.” 22 dollars every two weeks works out to about 572 percent annual interest.