Marc Andreessen Excited About Payday Loans

Liberty Street Economics
Except for the ten to twelve million people who use them every year, just about everybody hates payday loans. .... their “unconscionable” and “spiraling” fees and their “targeting” of minorities ..... the typical brick-and-mortar payday lender charges $15 per $100 borrowed per two weeks, implying an annual interest rate of 391 percent! ...... payday lending is very competitive ......

payday lenders outnumber Starbucks

as if they—payday lenders, not Starbucks—were a plague upon the land ..... each additional payday firm per 1,000 residents in a given Zip code was associated with a $4 decline in fees (compared with a mean finance charge of about $55). ...... fixed operating costs and

loan loss rates do justify a large part of the high APRs charged

.” ...... a 36 percent cap eliminates payday loans altogether. ..... payday lenders tend to locate in lower income, minority communities .....

contrary to tenets of classical economists, not all people always act in their own best interest

; they can make systematic mistakes (“cognitive errors”) that lower their own welfare. If chronic rollovers reflect behavioral problems, capping rollovers would benefit borrowers prone to such problems.


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