Why do you think the market equilibrium interest rate is as high as it is, typically over 400% APR?
read this article about payday lending: Why It’s So Hard to Regulate Payday Lenders | The New Yorker.pdfPreview the document. Here is a link to state-level regulations on payday loans: http://www.paydayloaninfo.org/state-information (Links to an external site.). Read both & come back here to discuss your responses to the following questions:An Internet search for payday loan turns up dozens of websites that promise “instant,” “easy,” or “no hassle” loans. What’s the cheapest rate you can find in your state? Would you consider borrowing at this price?Payday lending is a financial market. Why do you think the market equilibrium interest rate is as high as it is, typically over 400% APR? Compare it to the typical rates on credit cards, which are also “unsecured” loans (not backed by any physical asset), and explain the difference.Price ceilings hold down prices, but also cause shortages and transfer surplus from payday-loan store owners to borrowers. Knowing that, would you support a cap on payday loan interest rates in Alabama?What would you expect the outcome of such a policy (interest rate cap i.e. price ceiling for payday loans) to be for buyers (borrowers) and sellers (lenders)?
