I agree we should have less of it, but all legislation should be mindful of the consequences of certain types of restrictions.

"But most of the RiteCheck customers I interviewed had done the math and found that it was less expensive to use RiteCheck than to use a bank. In their experience, required minimum balances and fees for everything from ATM usage to account maintenance were going up."

https://www.philadelphiafed.org/community-development/public...

PS I'm not sure I'd call the payday lenders savoury myself, though they be less unsavoury than loan sharks.

On the other hand, the number of people who will no longer be bent over a barrel every day will be significantly improved.

(The older alternative to unsecured very high interest short term loans is those secured on valuables - the pawn shop).

> What tends to happen is not that people go to the Mafia (traditionally they come to you!)

The mob definitely loans money at high-interest:

http://archive.boston.com/news/world/europe/articles/2009/03...

https://en.wikipedia.org/wiki/Loan_shark#Post-criminalizatio...

> high interest loans from utility companies and landlords strikes me as an obscenity.

My point is usually that this is a lot cheaper, since these don't usually charge interest at the payday rates. Utility companies have barriers to cutting you off.

But ultimately people who have negative cashflow week-to-week are going to get in trouble. Limiting how much debt they can get in causes them to hit the buffers earlier, but less hard.

(Incidentally, this is yet another major problem with "universal credit": paying it on a 6 week delay is designed to force people to use payday lenders!)

Switzerland, not really a communist hell hole and quite liberal in economic matters, for example, caps annual interest rates at 15% annually.

You don't see more broken legs than anywhere else.

Switzerland is a wealthy low-crime country to start with, the mafia do not have a strong hold. For example the homicide rate in Switzerland is 0.54 per 100,000 people, by comparison in the United States it is 5.35 per 100,000 people.

> If you cap maximum interest rates then people who are deemed too 'high risk' will be refused credit. As a result, they will seek credit elsewhere.

You could solve the loan shark problem and cap the interest rate by socializing the rest of the risk through some mechanism -- say a regulation that requires TBTF banks to offer payday loans and make up for the loss through their other products. Obviously there are details to be worked out, but the burden of a policy to combat loan sharking does not have to fall on the most vulnerable.

but if banks are forced to make loans at a loss, aren't we effectively subsidizing people that don't repay loans? you might think this is a noble goal, but I'd doubt many people will be on board.

Perhaps, but I have little sympathy for the feelings of the better-off people who want to clutch every penny to the point that they are jealous of the help the needy might get. If they're able to block reforms, then I think efforts need to be made to change their attitudes.

Add: Plus a profit to that

But that seems to be covered. There are multiple banks who will provide credit to consumers at lower interest rates than that and obviously still can make a profit.

Car loans are usually lower than that. Mortgages go for between 1 1/4 and 2% (last time I looked).

The maximum rate of 15% is usually applicable for credit card debts.

There is a saying, you can accept any customers you want as long as the price (interest rate) is correct. As a group you can manage this pretty well. For some segments of unsecured loans the default rates are high enough to warrant those interest rates. The customers who score better gets lower rates as there is competition in the market and they often shop around. Having too high rates gives a lot of not taken up loan offers which the managers hate.

Car loans are almost impossible to lose money on especially the secured ones. It becomes a question of "how much can a person damage a car before it being repossessed". Usually the car is fine and one gets the money back as long as you don't loan out more than you expect can be recovered after said damage. That's why you can give so low interest rates. Unsecured car loans are much more expensive and often requires full coverage insurance.

So yes, one can give out loans to lower interest rates than 15% but then you have to cut off the lower scoring customers that would not be profitable with that rate.

You might want to rethink that slogan.

My point is that it's hard to enforce neutrality, because there is always an implicit incentive for arbitrators to find in favor of big companies. Even if those companies aren't directly choosing a specific arbitrator, big companies in the aggregate are the ones primarily driving the business.