The newly constituted Consumer Punishment Bureau has decided that ensuring borrowers have the capability to pay back their loans within 30 days is too onerous a requirement for lenders. It also lessens the chance that someone falls in the pit of despair of 300-600% interest on loans that continually roll over to the next. That's a good thing for society I guess.
I'm no fan of payday lenders, but I'm having a hard time seeing how these loans legitimately fit within the purview of the federal government. These are small loans and seldom involve interstate commerce.
Good question. I'm assuming Pay Day lenders fall under some sort of banking regulations. At least, I'd think they should.
They do fall under some federal banking regulations. I'm just having a hard time seeing why they should. If somebody walks into a payday can loan place and borrows $150, I'm struggling to see the impact that has on interstate commerce. State regulations? Absolutely, and most states do regulate and some even ban them.
How is that $150 loan different from a local community bank give a HELOC? Clearly I'm more liberal on this subject but I think it's a good thing the government attempts to limit predatory lending.
While I don't dispute that payday loans are very bad for a consumer it is not because the lenders are vultures. It's because extremely small loans are EXTREMELY hard to make money on. This article explains a bit why. https://www.forbes.com/sites/timworstall/2011/12/20/why-payday-loans-are-so-expensive/#a50ab0203990
Always amazes me how people can have such a lacking of grasp on how APR functions. They don't want to acknowledge that the $30-40 someone might pay for the short-term loan is actually less than they would have been paying on fees for bounced checks or late fees for being, well, late on payments. But OMFG, that $30 annualized across 12 months is simply too much... So instead it becomes easier to screw the people that actually NEEDED the money because the SJW mentality apparently carries the inability to do simple math...
Please, for the love of God, define "predatory lending". That's among the biggest loads of ********* ever invented by idiot lefties.
Thanks for the information. I'm sure we can all acknowledge that the average consumer that walks into a payday loan vendor is a generally less than safe bet thus I understand why they'd need to charge normal the higher rates. As far as I can tell, these rules were not intended to halt all payday loans but rather ensure that the borrower had the capability to repay the loan rather than those consumers in a downward spiral with no ability to pull out of the crash.
What the rules were "intended" to do doesn't mean ****. The road to hell is paved with good intentions. If there exist consumers "in a downward spiral with no ability to pull out of a crash", then they should not be borrowing more money as that serves only to make their situation worse. But those consumers are financial illiterates, so the left believes it's up to the government to save them from their own idiocy.
You're right. It's your Libertarian view vs. my progressive view. There is a benefit to society if you stop a lender from taking advantage of some downtrodden fool. You'd likely say let that fool be accountable for their own idiocy, even if that means digging that financial hole they've dug for themselves deeper. My ideal backstop is simply not as deep as yours. Do you assume that society won't eventually help out an individual? The help they need is much easier to give (and less costly) the shallower the whole, IMHO.
Your local community bank is usually FDIC insured. If you're taking the federal government's money or insurance, you take its regulations.
So you believe that the biggest fool, the Federal Government that is trillions of dollars in the hole and getting worse, is the right institution to monitor, protect, and bail out the other fools. Got it. Sounds like a sound, long-term plan for a very large ship of fools.
Assuming the "Federal Government" is a single entity might the most foolish of all. Thank you for your contribution, though.
Why should government at the federal level have anything whatsoever to do with a guy taking out a high interest loan for a few hundred bucks? Deez noted it above. If there is a need for big government to poke its nose into this business activity, shouldn't that government be at the state or local/regional level?
SN, The federal government is involved because they set the "disclosure" regulations on all lenders, not that the American public understands it. It is so ridiculous that when it was put in place, I suggested that every lender in the US stop lending at noon on a particular Wednesday (settlement day). By 130, the feds would be crying for relief. Obviously didn't happen, but I felt vindicated when the Arabs dumped $1 billion in a large Texas bank at 1 pm on a Wednesday. Fed funds went from 10% to ZERO in five minutes. The states have licensing rights on these places, but it's like perpetual care cemeteries being held responsible by the Texas Dept of Banking. Go over on Lamar and ask about it. Since old man Taylor died, nobody knows who does what or how. For what it's worth, Taylor was the only person assigned to all cemeteries in Texas for 40 years. Bottom line, nobody cares. Worse no one wants to be involved with their funding sources.
As Wells Fargo demonstrated a few months ago, there are conscienceless financial institutions that will screw over customers to the extent they are allowed to do so. Absent regulators, when they are caught screwing customers over ... customers can appeal to a conscienceless arbitrator selected by said conscienceless financial institution.
Yep, and in Texas bad companies can keep it in appeals literally forever, absent a Supreme Court, all members approved by the Texas Chamber of Commerce, stepping in to give them a pass.
Wells Fargo has gotten away with screwing their customers & employees for decades. It is not a recent issue. Only Washington Mutual & Key Bank are in the same category. As for regulators, they are lazy and not very bright. When Washington Mutual & Wells were pigeon holing house payments to make homeowners default, then foreclosing to get the equity, where was the Comptroller of Currency?