One solution to predatory payday lending

Payday  LoansPayday Loans by Steve Rhodes, on Flickr

They go by a variety of names, but payday loan shops usually have a common theme: Money is available for you, and it’s available now.

Of course, it’s not as simple as that. Sure, you get your $500 or $1,000 to make that rent payment or emergency medical bill, but the extremely high fees and interest rates can put you in a deeper hole. That makes for a vicious cycle, as these operations target mostly low-income people.

The solution? Walmart, says Slate’s Matthew Yglesias.

The solution to this problem, I think, would be for banking services to be performed by a firm that already has low-income clients and would have an interest in increasing its level of engagement with them even if the payday lending operation wasn’t profitable per se. In a word, you need Walmart.

Banks don’t touch this market because it’s not profitable enough. So will Walmart step in? It has tried and failed numerous times to get a U.S. banking license, so it’s certainly clear the mega-chain is interested in financial services.

The fear that Walmart would become too powerful is worth considering. But so is the reality that too many of us face: sometimes, you really need that $500.

For more on payday loans, check out this excellent Marketplace series.

  • Sally Nachelle

    This blog is really very informative and helpful. Now-a-days payday loan is helping people by giving an emergency loan. Most people feel shy to borrow money from their friends and relatives because money issues can ruin the family relations. This is why people try to avoid borrowing money from their close relatives and friends. In these
    situations, payday loans seem to be a good option to the people. Payday loan is very easy to get because the payday lenders don’t check the credit report of the consumers. The worst part of payday loan is that the interest rate is too high to afford. That’s why it becomes difficult for borrowers to pay back the full amounts. There
    are two types of payday lenders-licensed and unlicensed. So I feel people should check the legality of the payday loan companies and aware about the US payday loan laws before taking out a payday loan.