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What John Oliver and Sarah Silverman miss about payday loans

John Oliver's target du jour is the legendarily scammy world of "payday loans" — short-term unsecured loans that charge interest rates of 500 percent or even 1900 percent. In just over twenty years, he points out, payday lending shops have spread so fast that there are now more of them than McDonaldses: "Even ebola looks at that growth rate and thinks that's impressive."

Naturally, the companies in the industry do a good job of lobbying state governments to stay in business. At the end, Oliver brings on Sarah Silverman for a hilarious bit encouraging people to explore alternatives — "the way it works," she explains, "is that instead of taking out a payday loan you literally do anything else" — to giving your money away to these bottom-feeders.

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Yet as funny as this is, it neglects a really serious policy issue, which isn't simply a lack of regulation of payday lenders: it's a lack of options for financial services. People end up at payday lenders because stuff happens. Your car breaks down. Your plumbing stops working. You lose your keys and need a locksmith. That's when, as Dylan Matthews has written, you'll be glad to have established an emergency fund in the past. But we know that many middle-class people don't do that and end up relying on high interest-rate credit cards to fill the gap.

Many lower income people can't even qualify for credit cards or put together a big enough nest egg for banks to bother offering them savings accounts. Payday lenders rush in to fill that gap in part because it's a very real gap. To help people avoid the downward spiral of financial despair that can result, you need some other way to fill the void. Something like postal banking — small-scale government-run savings and lending vehicles that could provide the service without taking nearly as big a cut.