Payday lenders seek to overturn interest rate cap

Clark is a longtime opponent of the payday lending industry. He's privileged to have been able to testify against the industry in state legislative committees. Right now, however, he's horrified by the payday industry's latest tactics in Ohio and Arizona.

First, though, a little perspective: The Wall Street Journal reports that the average interest rate charged by payday lenders is just under 400%. Interestingly, the industry doesn't disclose interest rates. Clark thinks it would be OK to charge 400% if they clearly disclosed it to customers. But they don't.

That has prompted states like Ohio and Arizona to cap the interest rate that payday lenders can charge at 36%. As you can imagine, such a limit severely cuts into their profit margin.

So what did the payday lenders do? In Ohio, they spent $16 million on saturation-bomb advertising to get an initiative on the ballot that could overturn the state's 36% cap.

Clark recalls a payday lender on Clark Stinks who was hurt by his characterizations of the industry. That individual may have a good heart and feel the business serves a positive function for society. But Clark doesn't believe an interest rate of 400% can truly be a positive thing.

Yes, payday lenders do open in neighborhoods that the banks have abandoned. Likewise, they do treat people with dignity when they walk in. And yes, they say "yes" to people in low-income neighborhoods that have otherwise been beaten by life -- but the consequences of that "yes" are brutal.