While Rourke O’Brien’s concern for those who take out payday loans is understandable (“A fair alternative to predatory short-term loans,” Sun Journal, July 3), his solution is a recipe for fiscal disaster.

His proposal to take a profitable, private industry and replace it with a government-funded bureaucracy will only add to the United States’ deficit while simultaneously reducing access to credit for vulnerable consumers.

Though he couches his proposal as one that would be deficit-neutral by writing that the government could charge a low rate of interest to defray administrative costs, he fails to understand that low APRs are simply not workable with short-term loans. A 36 percent APR — the rate cap most often tossed around by “consumer advocates” — on a two-week loan for $100 nets just $2.

Just to break even at that price point, there could only be one default for every 50 loans paid back in full — and that figure ignores the administrative costs. Considering the credit risks that these consumers represent, that is a fanciful number. In reality, the taxpayers would end up eating the cost for O’Brien’s new bureaucratic nightmare.

Given the state of our nation’s finances, perhaps we should let consumers make the choices that best fit their needs, instead of replacing private debt with public deficits.

Sarah Longwell, Director of Communications

Center for Consumer Freedom, Washington, D.C.