Originally published at adn.com on August 26, 2025.
Trevor Storrs’s recent op-ed (“Predatory lending in disguise — the truth about payday loans in Alaska”) repeats the familiar talking points: payday loans are “seawater to the thirsty,” caps at 36% are “reasonable,” and restrictions somehow encourage “safer” credit alternatives. It’s a compelling soundbite. But after years of studying these issues in states like New Mexico, Illinois, Minnesota and beyond, I can tell you this: the real harm comes not from allowing access to small-dollar loans, but from banning them.
We’ve heard it before: banks and credit unions supposedly provide the “safe, regulated alternatives” that rate-cap advocates champion. The reality? The products are often advertised, but rarely delivered. In Minnesota, two college students, perfect examples of borrowers who might need a few hundred dollars to cover an emergency car repair or travel home for a family crisis, were turned away by every bank they tried. Even well-qualified borrowers, including myself with an 800+ credit score, were denied by both banks and credit unions.
When policymakers force a 36% APR cap, the supply of legal credit collapses. That’s precisely what happened in New Mexico after House Bill 132 took effect in 2023. Lenders shuttered, “buy now, pay later” services exited, and thousands of consumers were left with no legal borrowing options. But the demand for emergency credit didn’t disappear. Instead, borrowers were driven underground into black-market lending schemes. One example saw Native American employees of a caregiving company trapped in the most egregious example of the cycle of debt I have ever seen: loans exceeding 2,700% APR, repayments deducted straight from their paychecks, while regulators looked the other way.
That’s the unintended consequence of “protection.”
Mr. Storrs cites APR figures as if borrowers take out these loans for 12 months. They don’t. Most payday loans are repaid within weeks, and the cost is transparent. Compare that to the hidden overdraft fees or late payment penalties at mainstream banks, which often exceed what borrowers would pay at a storefront lender. Surveys consistently show that 95% of payday borrowers value the option, and the overwhelming majority are satisfied with their last loan.
In our earlier payday example, the math highlights why APR is such an ineffective mechanism for determining the cost of short-term loans. One employee borrowed $125, paid a $10 fee, and paid back the loan one day later on payday. Some ATMs charge more than that. It’s a $10 fee. The reality is that a price control eliminated every other legal option, leaving borrowers with no choice but to turn to their abusive employer.
In Alaska, just like New Mexico, one-third of households are unbanked or underbanked. Telling those families to rely on credit cards (with average APRs of 24%) or to “just borrow money from a friend” ignores the lived reality that many are locked out of those systems. For them, a regulated payday loan is often cheaper, more transparent, and more accessible than the alternatives.
Banning these loans doesn’t eliminate hardship. It deepens it. Families who once relied on a $400 loan to cover rent or utilities are now forced into bounced checks, pawnshops, or unlicensed loan sharks. We saw it in Illinois, we saw it in New Mexico, and Alaska will see it too if lawmakers ignore the evidence.
If we truly want to protect consumers, the answer isn’t arbitrary price controls. It’s transparency, competition, and choice. Licensed small-dollar lenders should be allowed to operate under clear, enforceable rules that ensure borrowers understand terms and costs. That way, Alaskans can choose what works best for them, without being pushed into the shadows of an unregulated black market.
Good intentions don’t pay the bills. But choice, transparency, and access can.