Credit Reform

While it is absolutely true that credit card issuers maximize their returns through hefty stealth charges, and payday lenders charge absolutely rapacious interest rates, it is also apparently true that these awful loans often help avoid even worse fates.  And I don’t see any way to cut off the credit to people who are ignorantly or irresponsibly getting into trouble, without also cutting it off to a bunch of people who need it.

via On Poverty, Interest Rates, and Payday Loans – Megan McArdle.

Read the whole thing for a fascinating look at the situation regarding credit for the working poor.

As with so many things, the current state of credit results in social ills and social benefits. The ills are obvious, the benefits are not. Yet evidence suggests that the good far outweighs the bad.

Reformers, blinded by outrage at the ills, ignore the evidence and want to force changes which will avoid the ills. Those changes will also undo the good.

Good intentions are no substitute for clear thinking.

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