The bulk of attention in the coming U.S. elections has been on the main fight between Obama and Romney, understandably -- but another very important fight taking place in Massachusetts is the U.S. Senate race between Democrat Elizabeth Warren and her Republican opponent Scott Brown.
Harvard professor Warren, a long time advocate for consumer protection, shot into political stardom when she worked on the implementation of the Consumer Financial Protection Bureau -- an outcome of the Dodd-Frank Wall Street Reform and Consumer Protection Act which had been signed into law by President Obama in July 2010.
The remit of the bureau includes some of the financial products and services that in recent years have been notoriously detrimental to the very consumers Warren has always sought to protect. Payday lenders, mortgage brokers and check-cashing firms have rightly been targeted by Warren in her quest for a fair deal for the most vulnerable in the U.S.
As a British researcher on the payday lending industry in the UK, I have noted the evolution of the industry as it has emerged from the U.S. Fifteen years ago virtually no payday lenders -- which bear resemblance to 'salary buyers' who would buy, at a discounted price, a borrower's next wage packet -- existed. Now at least 5 percent of all U.S. citizens have taken out such a loan.
The industry began in the early 1980s -- largely the outcome of the Depository Institutions Deregulation and Monetary Control Act in 1980, which was a reaction by the federal government to the rise in inflation, overriding existing state usury laws, giving way to the elimination of interest rate limits.
Many states stepped up their laws towards usury, but the payday lenders who didn't emigrate (to places like the UK) linked up to banks and rebranded their products as bank loans, working as best they could within stricter rules.
This, by no means, limited the reach of payday lending. Today there are now over 20,000 payday loan shops in the United States -- more than McDonald's, Wendy's, and Burger Kings nationwide.
Paul Leonard, director of the California office of the Center for Responsible Lending (CRL), pointed out: "it's a myth that these loans are meant for one-time use. They are a trap for -- and the lenders business models rely on -- repeat borrowing."
The Consumer Federation of America found that families earning $25,000 per year with no emergency savings were eight times as likely to use payday loans as families in the same income bracket with more than $500 in emergency savings.
In states like Tennessee (4th poorest state) and South Carolina (5th poorest state) there are five payday loan shops for every 10,000 households.
Elizabeth Warren's work thus far has been to ensure a better deal for consumers in the poorest households -- and she insists that she will continue to do this work as senator if she wins this week. While the televised debates between her and her opponent have seen Brown take low blows (highlighting on the wage she draws from her academic post), this speaks volumes about the strength of her politics and hard work for consumers.
A new poll by Public Policy Polling has shown that Warren is ahead of Brown 52 percent to 46. Though voters must not be complacent. Warren's great work proves her worth in this election, and though I can't vote for Warren myself (though I would if I could), I'd recommend anyone in Massachusetts to vote wisely.
Elect Warren for a better deal for consumers and the squeezed Middle classes.