Takoma Park Financial reform for consumers has been in deep water and drowning ever since Rep. Barney Frank nixed the White House inserted CRA protection from the bill, but in the “something is better than nothing” world we’re forced to live in these days, at the least we have to draw the line at giving a “bye” to predatory payday lenders. Seems though that lame duck, Wall Street bound Senator Chris Dodd (D-CT) is bending over for Senator Bob Corker (R-TN) to pray at the false god of bipartisanship while Corker plays footsie with his many friends in the payday rip-off world to create a loophole in the proposed legislation to let them escape regulation. Stop this now!
We know from the many successful provincial level fights led by ACORN Canada over the last several years in Ontario and British Columbia that in fact the whole premise of the industry is wrong. In the USA they are arguing that they would go under with a 36% cap on loans, yet Dollar Financial (which is owned by USA interests) and others operate under the new laws in Canada just fine, in fact, we believe too fine, which is why we are still hammering away every chance we get. Their cry for loopholes to Corker and Dodd is masked in a twofold strategy: (1) blame the banks for the financial meltdown and (2) claim they would be forced out of business by regulation.
On the second the Canadian experience is telling. They can live and do fine under regulation, because unfortunately working stiffs too often find there is “too much month and too little money.” The real problem we found through our research with experts in Canada is recidivism. Once someone got a payday loan, they were pushed into a cycle of one such loan after another for 18 months or more. The business model is predatory and depends on repeat customers because banks don’t make small loans to tide a family over. The wild interest rates are just more slopping gravey.
As for blaming the banks, what a laugh. This industry wouldn’t exist without the big banks that provide the money for them to loan. What did you think? It was growing on trees? I can still remember when we were negotiating with Wachovia (now a part of Wells Fargo) and surprised them by pulling out research that showed how much they were financing the payday lending world along with the other big boys. This was after they danced around their involvement. The report in the Times that National Peoples’ Action (NPA) has been pushing the Federal Reserve and Ben Barnacke to push banks away from the trough as factors and financiers of this industry is good news, whatever the outcome.
Bottom line: don’t believe this bull. If the industry can live with the restrictions around military bases, then they can live the same way when stopped from sucking the life out of low and moderate income neighborhoods.
Regulate them hard and with whatever is handy until they either get right or close their doors!