Payday Loans and Newspapering

[Don Coombs <dcoombs@uidaho.edu>]

What does it mean that three "Payday Loan" operations have opened in
Moscow in the past year? These are places you can borrow money for a short
time -- "until you get your next pay check." And I'm sorry, not being a
sociologist, I have no idea what it means.

BUT I have a better idea what interest is charged than does the Daily News
reporter who covered the story. A loan "costs" $20 per $100 borrowed,
according to the story, and that is the cost for two weeks. The story ends
by saying that 20 percent may seem a high rate, but that the manager of
the newest operation doesn't think so.

I think it would have been desirable for the newspaper to be a
little more accurate: To be meaningful, interest rates have to be 
"annualized" and because there are about 26 two-week periods in a year,
the true interest rate in this case would be about 520 percent.

Reference: Pace 3C, column 1, Nov. 1 - 2 edition of the Daily News.

Don Coombs