If you care about the consumer financial protection conversation that's been going on in Washington, you have undoubtedly experienced exulted highs and despondent lows as the issue winds its way through the Congressional sausage maker. If you don't care and have not paid attention to the debate, you should.
The question of how banks are regulated when it comes to consumers seems at first to be about as exciting as re-caulking the tiles in your shower. But I promise - the topic gets much more exciting if you happen to care about your personal bottom line. Today's news that the Senate will remove the teeth from consumer protections by giving a pass to payday lenders should make you sick. The exemption for payday lenders, driven by Tennessee Republican Senator Bob Corker, is a stomach-turning twist for many reasons.
Here's one of those reasons. You might be a hard working person who just lost one of your jobs. But you still need money to buy food to feed your kids, and gas to get to work. And then your car needs new brakes. And you just don't have the money to pay for new brakes. Where do you turn? Millions of Americans turn to so called payday lenders. Payday lenders are well-oiled machines that specialize in gouging people out of their money. They are engineered to trick and trap you on their way to stratospheric profits, using products with rates and terms that would make a bookie blush. Payday lenders have achieved this kind of uber-profitability because they've managed to avoid regulations till now. Payday lending practices deserve our attention because these lenders operate everywhere. In fact, there are more payday lenders in this country than there are McDonald's.
I understand the view that a government cannot legislate or regulate wise choices, and in many cases, I agree that this is true. Payday lenders however, do require scrutiny and action from regulators and legislators. People will always make poor choices - this is elemental to the human experience. In fact, every single American will make poor choices ranging from "oops, I shouldn't have had chili on those curly fries" to the serious and consequential "I really should have paid child support."
The role of government is to regulate intelligently and fairly when a business or industry takes advantage of poor choices made by Americans, and these poor choices result in measurably consequences that hurt individuals, our society and our economy. This is especially true when a business is set up to plumb economic desperation - the precise raison d'etre for payday lenders.
Barney Frank wants to televise a conference on consumer protections to call out the Senate for doing such a poor job in protecting Americans from shady consumer financial practices. Some may dismiss this as political theater. But Senator Corker, and his colleague Senator Dodd have espoused indefensible positions on the payday exemption. The American public deserves to see them squirm as they make hollow claims that their plan is good for us. In my book, I consider the exemption for payday lenders to be a very poor choice by people who know better.
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Tomorrow, it will happen again. And the next day and the next and the next.
The Supreme Court is similarly bought. The Senate. The House. The White House to be sure. The commissions. The bureaus.
What are you going to do with $25,000.00, sir? If you were a Senator, that's how much money you would have received in bribes just in the time so-far it has taken you to read this little set of paragraphs.
Even though Article 2 Section 4 of the US Constitution expressly declares that "all civil officers shall be removed from office for ..." (check out word #25) ... that Article naively relies upon SELF-enforcement. Which will not work if an organized-crime syndicate manages to corrupt the entire Federal Government at once.
Which, believe it or not, it has.
Yes, it has.
5%? So you expect someone to give you a loan of $100 for the week and pay them $0.10 for providing that service? So basically the clerk at the counter has to process 1 a minute to cover an hourly rate of $6.00/hr
And what about those who default - who covers those costs?
Yeah, go ahead and regulate pay-day lenders. And when there are none left since they can't make a sustainable business, then you can head right over to your local bank/credit union and see them just flat out refuse to provide the service.