Don't lose too much sleep over the fact that some payday-lending businesses in Washington will be forced to close up shop because of new state regulations.
They certainly haven't felt any remorse for charging customers exorbitant interest rates and excessive fees.
A new state law that recently went into effect limits the size of a payday loan to 30 percent of a person's monthly income or $700, whichever is less, according to an Associated Press report. It also limits the number of loans any one person can get in a calendar year to eight.
The way we see it, the law is as much about restricting predatory lending as it is weaning the people who subject themselves to it.
Payday lenders are particularly concerned about the effect the eight-loans-per-year rule will have on their businesses.
That's because their best customers are stuck in a vicious cycle and need loans on a regular basis just to keep pace with their payments from previous loans, oftentimes from different payday lenders.
That's not to mention the money they need to pay their other bills and put food on the table.
"A lot of companies make loans because people take out another loan, and another loan - that's where the revenue stream comes in," said Deborah Bortner, director of Consumer Services at the Washington Department of Financial Institutions.
Breaking that cycle might have some rough short-term consequences for habitual borrowers, but they will see more money over the long haul once they get out from under their high-interest loans, some of which carry annual rates as high as 800 percent.
The Statewide Poverty Action Network estimates the new law will save Washington residents about $100 million in fees per year, according to the AP report.
The people who rely on payday loans to make ends meet might not realize it yet, but having their cash cows run dry might be the best thing that could happen to them from a financial perspective.
