• Share
• Print
• Email

In the wake of the financial crisis, Congress is considering new regulations on non-traditional lending products like payday lending, although there is no evidence that such products were related in any way to the financial crisis. If enacted, the principal legislation, H.R. 1214 (the Payday Loan Reform Act of 2009), would limit the charge for a single-payment loan to an effective 391 percent annual rate ($15 per $100 two-week loan). H.R. 1214 also purports to limit borrowers to one loan at a time from a single lender, prohibit rollovers, and limit borrowers to one extended repayment plan every six months. Economic theory and empirical evidence strongly suggests that these paternalistic regulations would make consumers worse off by limiting their choices to unappealing alternatives.