Search Results for ‘payday lend’

J.D. Vance on payday lending

J.D. Vance’s bestselling memoir Hillbilly Elegy, which I read last week and recommend (reviews: Aaron Renn, City Journal; Robert Pondiscio, U.S. News) is not as political a book as the early reviewers made it sound, and Vance takes an unsentimental view of the unlikeliness of political solutions to cure the cultural ills of families and communities he knows from his youth. Here and there he does have a few words to say about laws, though. From Helen Dale’s review in the London Spectator:

He points out – with his poor credit history – that he has had recourse to payday lenders. On one occasion, he avoided a large overdraft fee. Without a payday lender, he’d have been forced to go to a loan shark – which, given the drug culture among poor whites, could have been injurious to his health.

‘The legislators debating the merits of payday lending didn’t mention situations like that,’ he notes. ‘The lesson? Powerful people sometimes do things to help people like me without really understanding people like me’.

Payday lending crackdown continues

“The U.S. Department of Justice (DOJ) has filed a series of criminal charges against short-term lending companies, accusing the unrelated firms of violating the Racketeer Influenced Corrupt Organization (RICO) Act, a federal law passed with the intention of combating organized crime.” It says lenders have falsely claimed affiliation with American Indian tribal governments so as to evade regulation. [Ben Johnson, Heartland]

The forces of consumer financial regulation led by Sen. Elizabeth Warren have made it clear that they would like to ban “payday” lending (short-term, at high interest rates or fees). Yet history teaches that such lending — like gambling, late-night alcohol, and many other disapproved activities — is in such steady demand that short of government supervision of a population more intense than anything in living memory, the real choice is whether to tolerate an aboveboard legal market or to drive it into informal and sometimes illegal channels. In the latter circumstance, consumer remedies against bad actors may be non-existent, and extra-legal status and the absence of advertising may make it hard for borrowers to compare possible sources of loans. As for enforcement methods following non-payment of debt: “Driving [businesses] underground will very often make it worse,” Olson said. “It will mean outright violence, at worst, or extralegal sanctions for those who aren’t paying their debt. You might find you like extralegal sanctions less than you like things they can currently do, like ruining your credit rating.” More: Eric Boehm.

Banking and finance roundup

  • Senator Elizabeth Warren and her Accountable Capitalism Act represent an attempt to revive a theory of the corporation that fell out of favor long ago, that corporate status is a grant of favor in exchange for which the state may demand services or cooperation [Abdurrahman Kayiklik, Columbia Law School Blue Sky Blog; earlier with links to Warren on corporate governance and other topics]
  • Bill in Congress would enlist banks in watching gun sales [Robert VerBruggen/NRO; Noah Shepardson, Reason] NRA, in litigation, contends it has evidence New York state officials negotiated with U.K.’s Lloyds to curtail insurance availability in a way specifically targeted at the association [Stephen Gutowski thread]
  • “The Misguided Quest to Limit Choice in Consumer Credit” [Diego Zuluaga]
  • “The CFPB and Payday Lending Regulations” [Peter Van Doren last February; earlier on payday lending; Federalist Society Regulatory Transparency Project video on regulation-through-investigation of payday lenders with Jamie Fulmer, Chris Peterson, and Brian Knight]
  • Federalist Society podcast on Community Reinvestment Act with Aaron Klein and Diego Zuluaga;
  • Learned a new word, lutulent, which means “muddy, turbid, thick” and is more or less the opposite of luculent (“lucid, clear, transparent”) [Keith Paul Bishop on unclarities in new California law requiring gender quotas on boards (“a lutulent mess”); earlier here, etc.]

Operation Choke Point documents show FDIC brass covertly pressured banks

Since the termination of Operation Choke Point, some have questioned whether Obama-era federal regulators really did engage in systematic and top-down attempts to squeeze off access to financial services for businesses that were lawful but disliked. Now Rep. Blaine Luetkemeyer (R-Mo.) has released documents produced in connection with a lawsuit against the Federal Deposit Insurance Corporation. They show extensive pressure by numerous FDIC regional directors and other officials on regulated banks to terminate customer relationships with payday lenders (the banks were generally already not themselves engaged in such lending). They also include repeated wordings about how higher-ups wanted the pressure applied and that banks’ decisions to cut off customers should be styled as if it were a voluntary choice. [Luetkemeyer press release; Norbert Michel, Forbes; John Berlau, Forbes; trade group Community Financial Services of America]

Banking and finance roundup

  • Using regulation to stomp political adversaries endangers rule of law: Gov. Cuomo directs New York financial regulators to pressure banks, insurers to break ties with National Rifle Association (NRA) [J.D. Tuccille, Reason]
  • My opinion piece on New Jersey governor’s scheme for a state bank has now escaped its WSJ paywall; WSJ readers respond [letters] And Sen. Kirsten Gillibrand [D-N.Y.] has now introduced a plan to get the federal government into retail banking via the post office [Daniel Marans, Huffington Post, quoting Gillibrand’s interesting claim that “Literally the only person who is going to be against this is somebody who wants to protect payday lender profits.”] More: Nick Zaiac on postal banking;
  • “From Kelo to Starr: Not Merely an Unlawful Taking but an Illegal Exaction” [Philip Hamburger on federal government’s acquisition of a dominant equity stake in AIG]
  • Court’s opinion on consumer debt contract formed in New York specifying Delaware law undermines “valid-when-made” doctrine that promotes liquidity of secondary debt market [Diego Zuluaga, Cato]
  • “Some blockchains, as currently designed, are incompatible with” the European Union’s General Data Protection Regulation [Olga Kharif, Bloomberg via Tyler Cowen]
  • And if you’re interested in the legal constraints holding back the extension of banking services to the cannabis industry, tune in to a Cato conference on that subject May 10.

Good riddance, Operation Choke Point

The Department of Justice has confirmed that it is putting an official end to Operation Choke Point, the under-the-radar initiative by Obama financial regulators to discourage banks from doing business with certain disfavored businesses such as payday lenders and gun dealers. I’ve written a piece for the Washington Examiner on it, excerpt:

The fate of Choke Point should serve as a warning that it’s dangerous to allow those in power to flag legal-but-suspect domestic businesses for shaming and commercial ostracism — especially if the process is covert, and especially if the result is to cut off the outcasts from access to the basics of economic life.

At the same time, it’s significant that the answer to Choke Point was *not* to pass some new law compelling banks to do business with payday lenders, fireworks stands, or X-rated studios.

Part of a free society is that we shouldn’t force commercial relationships on private actors. Businesses — and that includes providers of credit and payments services — should legally be free to follow their conscience.

And Eric Boehm quotes me at Reason:

“It should serve as a warning that the government doesn’t get to flag for banks—or businesses generally—which legal-but-suspect domestic customers it would like them to ostracize,” Olson told Reason on Friday. “Those in power must refrain from signaling that they’d be pleased if certain categories of otherwise legal customer get cut off from their access to economic life.”

Earlier at our tag. More coverage: Politico, Vending Times (vending machine sales companies hail decision).

NYT on auto title loans

“With a crackdown on payday lenders, subprime borrowers are increasingly using auto title loans, whose high interest rates can lead to repossession and financial ruin.” [DealBook/NYT] Todd Zywicki at Volokh finds much lacking in the article’s analysis: “it turns out that those who use these products are not as stupid as the Times’s reporters imply they are.” Reihan Salam: “Remember when people said that cracking down on payday loans would have regrettable consequences?”

News from Operation Choke Point

Throwing its Chicago regional director under the bus, the Federal Deposit Insurance Corporation (FDIC) has disavowed a February 2013 letter in which the director had told an Ohio bank, “It is our view that payday loans are costly, and offer limited utility for consumers, as compared to traditional loan products … Consequently, we have generally found that activities related to payday lending are unacceptable for an insured depository institution.” Critics have charged that the federal government has not been forthright about the extent to which it discouraged banks from providing services to lawful but frowned-on businesses in such lines as payday lending and ammunition sales. [Kevin Funnell, earlier on Operation Choke Point]

Banking and finance roundup

  • Payday lenders sue federal agencies over Operation Choke Point [Bloomberg News, Business Journals, earlier; more, Funnell]
  • Speaking of those lenders: “California Supreme Court to review ‘rent-a-tribe’ arrangement for payday lenders” [CL&P, more]
  • “If someone starts trying to blame the Global Financial Crisis on ‘de-regulation’, you can stop reading…” [Lorenzo via Arnold Kling]
  • Can we just admit that the feds’ real target in the Credit Suisse case was the bank’s customers? [ABA Journal]
  • Maryland does not approve of Bitcoin [my Free State Notes via Kevin Funnell]
  • Behind Halliburton v. Erica P. John Fund, SCOTUS’s big case on securities class actions, two lawprofs are jousting [Alison Frankel, Reuters, and there’s a Cato connection; earlier]
  • For expats, FATCA raises “prospect of being discriminated against as an American for all things financial” [Peter Spiro/OJ; Sophia Yan, Money] More renounce U.S. citizenship [Yahoo] A Canada-based FATCA resource [Isaac Brock Society] Earlier here, etc.

House votes to defund Operation Choke Point

The vote, which has occasioned little notice thus far in the press, took place on a proposed amendment brought to the House floor by Rep. Blane Luetkemeyer (R-Missouri) and co-sponsored by three Democratic members (Cardenas, Hastings, Perlmutter) as well as two other Republicans (Mulvaney, Yoder) [Kelly Riddell, Washington Times] The investigation by Rep. Issa’s committee released last week capped a steadily mounting furor, starting among groups like payday lenders experiencing reduced access to the banking system but spreading to various “vice” businesses and the firearms community — assuming the administration is still distinguishing the latter from the former. Earlier here, here, here, etc.