Payday lenders forced to close in Montana

via NPR - full article

Facing overwhelming resistance from Montana voters, payday lending rates have been capped at 36%, forcing most operations in the state to close. Mr. Bernie Harrington (President, Montana Financial Service Centers Association) said

He thinks all the payday car title and consumer lenders which offer only short-term loans will end up closing, estimating anywhere from 400 to 600 jobs lost. Harrington's number is a very rough estimate. North Carolina-based Center for Responsible Lending has been advocating for interest rate caps all over the country. Vice President Uriah King says those jobs do more harm than good.

Generally Americans are inclined to let consumers enter into voluntary contractual agreements, but the horror stories of the perpetually indebted poor have turned this into an emotional debate. Lower income residents in Montana may have to make some hard decisions soon, next time they are running low on cash and need emergency car repairs. The advocates of the the caps have mentioned banks and credit cards as viable alternatives, but many people have poor credit histories and banks are wary of dealing with high risk clients. That was the driving force behind the higher interest rates, as payday loans are one of the riskiest types of loans. Montana joins several other states who have enacted legislation to ban or cap interest rates on payday loans.