By: Jer Ayles. Thomas Sowell at the National Review wrote an interesting article about payday loans and the magic of numbers.
In it he wrote, “A common practice in making small loans of a few hundred dollars for a few weeks is to charge about $15 per hundred dollars lent. Politicians, the media, community activists, and miscellaneous other busybodies are able to transform these numbers into annual percentage charges of several hundred percent, thereby creating moral melodramas and demands that the government “do something” about such “abuses.” [So-called excessive profits?]
Mr. Sowell goes on to discuss the ramifications of the passage of anti-small dollar lending legislation in Oregon that reduced the maximum allowable usury rate to 36% resulting in the closure of Oregon small businesses, the misinterpretation of “numbers” by politicians and the media to achieve their wrongheaded goals and more. He ends with this, “In other words, numbers do not “speak for themselves.” Politicians, the media and others speak for them — very loudly, very cleverly, and often very wrongly.
He also wrote, “Not surprisingly, most of the small finance companies making payday loans in Oregon went out of business. But there are no statistics on how many low-income people turned to loan sharks, or had their electricity cut off, or had to do without their medicine.”
“This is just one of the many ways in which self-righteous busybodies leave havoc in their wake while going away feeling noble.”
It’s an inciteful article. It’s entitled, “Magic Numbers, Don’t be misled by payday-loan statistics.” It’s short and concise; certainly worth a few minutes of our time!
Again, here’s a link to the Thomas Sowell piece in the National Review: “Magic Numbers Don’t be misled by payday-loan statistics.”