There is a strong argument for advising regulators to avoid restricting consumer access to credit alternatives. A piece written by Todd Zywicki and Robert Sarvis  at Mercatus.org does a good job of championing a multitude of financial products including car title “pledge” loans and payday loans. Here’s a portion:

“Well-intentioned legislators and regulators assume that restricting particular forms of credit will lead to fewer bad financial outcomes. But this is misguided and can lead to worse, not better, outcomes. Restrictions on particular types of consumer credit don’t necessarily induce consumers to refrain from unnecessary purchases or to avoid bad out- comes. Consumers resort to these financing options because they have pressing needs. So repressing one form of consumer credit will often only lead to a shift to other new or existing forms of consumer credit offered on less favorable terms for consumers. Restrictions on payday lenders might simply turn them into title lenders, as they seek to make up for caps on fees and interest rates by demanding collateral to reduce losses in the event of default, or push consumers to online payday lenders, which often charge higher rates than brick-and-mortar payday lenders. The ad hoc regulatory program of restricting disapproved forms of consumer credit thus has a whack-a- mole nature to it; limiting one form simply spawns a new one that avoids existing regulations.”

Read the entire article here: http://mercatus.org/publication/pitfalls-regulating-consumer-credit