❝ The government’s consumer watchdog on Thursday proposed a set of new rules designed to rein in the practices of American payday lenders, taking aim at a profit-making model that involves staggeringly high fees and often leaves serial borrowers with spiraling debt.
The proposal from the Consumer Financial Protection Bureau marks the first attempt by the federal government to regulate shorter-term loans, which also include auto title and installment lending.
❝ The rules still face months of review — and potential court challenges — but if they take hold they could dramatically transform and shrink an industry that provides cash to borrowers in a pinch. Some lenders say that under the new rules fewer loans will get made; they’ll have no choice but to close up shop. Yet consumer advocates see this as an opportunity for borrowers to turn to safer options — without having to pay triple-digit annualized interest rates…
Yes, Congress and your friendly neighborhood state legislators could have sorted this out long ago. Protecting citizens against loan sharks used to be a priority. We had laws against usury. They were dropped at the request of credit card companies.
Small differences count with politicians. Along with timely campaign donations.
❝ The CFPB was created in the aftermath of the Great Recession, in part to address potential areas of financial abuse. But the agency is controversial [among political hacks], and some lawmakers have recently introduced bills that could weaken or undercut the payday rules. Currently 14 states, as well as the District of Columbia, place tight caps on interest rates; in practice, that amounts to an unofficial ban on payday lending. But the CFPB is not allowed to limit interest rates and has looked at other ways to take aim at the industry.
While it’s red meat to socially indict Republicans as responsible for the attacks on the CFPB, Democrats are as likely to take million$ in campaign contributions and magically find themselves in opposition to the premise of defending consumers in a principled fashion.
Starting with Debbie Wasserman-Schultz, chair of the Democratic National Committee.