'Cap the rate?' No, keep the freedom

Maybe it’s well intended, but the ballot initiative to “cap the rate” on payday loans is another dose of “nanny statism” with very real consequences.

Initiative 164 is also deceptive in a particular way — it is presented as a regulatory measure that will merely rein in a type of business, without revealing the reality that it will spell the end for that type of business.

Some payday lenders may not be the most savory operations, but they provide a service that Montanans of their own free will choose to utilize. And that service, legal short-term loans, will probably cease to exist in Montana if I-164 passes. The current maximum earned interest on an unsecured, two-week loan for $300 would drop from $75 to $4.20 — not nearly enough for payday lenders to stay in business.

They’ve closed up shop in other states where similar measures have passed, and if the same happens here, it is predicted to lead to the loss of 600 to 900 jobs, the loss of state tax revenue and increased unemployment-benefit costs.

None of the above are good medicine for Montana’s economy.

Perhaps most importantly, the initiative would eliminate a free market choice for Montanans.

It’s not widely recognized, but the fact is that payday lenders cater mostly to people with poor credit ratings who cannot get loans through other sources. They have no other legal options.

Well, that brings up a dirty little fact that those associated with “cap the rate” don’t want to talk about. There ARE illegal options that people in need of quick money always have available. Black market lending, or “loan sharking,” would likely occur if I-164 passes. And quite possibly, people who can’t get the money they need to feed their families or pay their bills will resort to even more drastic measures such as robbery or drug-dealing.

Proponents of the initiative say people who use payday lenders succumb to a relentless cycle of high-interest loans that they cannot escape. That probably happens. But not always. There are surely people who seek payday loans only for occasional emergency relief.

I-164 amounts to a we-know-what’s-best-for-you measure, and voters should not buy it.