December 04, 2019

Congress Wants to Ban Payday Loans

Timothy Birdnow

Congress wants to ban payday loans.

From the Washington Times:

Rep. Glenn Grothman, Wisconsin Republican, are the cosponsors of a bill called the Veterans and Consumer Fair Credit Act, (the VFCA bill has nothing to do with veterans and several veteran groups have written to complain of this ruse). It would cap interest rates on short-term and emergency loans at 36 percent. Critics of short-term lenders say they "target” low-income and minority Americans. The left says this new law would "save” low-income Americans between $5 billion and $10 billion a year.


For Americans tangled in these kinds of financial tight spots, payday lenders are saviors, not devils. The $5 to $20 fee for an emergency cash loan is a small price to pay. Except that many in Congress don’t think so. They complain that a $10 or $15 fee for a $200 loan paid back in two weeks can have an annual percentage rate interest or up to 400 percent. But an APR is a totally irrelevant statistic on a 10- or 14-day cash advance. The Wall Street Journal has calculated that the APR for a bounced check or a late credit card payment can sometimes exceed 1,300 percent. Are we going to eliminate credit cards too?

One vital on-the-street reality that the consumer advocates and politicians fail to take into account is that payday and online lenders have actually helped low-income areas in an important way: They have largely replaced loan sharks. The interest rate on an unpaid loan to the loan shark isn’t a $10 or $20 fee, but a broken arm.

It also speaks volumes of the motivation of the Fair Credit Act and its supporters that the law would exempt credit unions. These are tax-exempt institutions that are direct competitors to the payday and online short-term lenders –- and they’d like nothing better than to run the competition out of town –- just like McDonald’s would love to shutter Burger King. Credit unions are also major funders of many of the consumer interest groups hammering payday lenders. So it might be too charitable to even say that VFCA supporters are primarily driven here by a misguided concern for the financial well-being of lower-class Americans.

But the motives really don’t matter here — the results do. Run short-term lenders out of business, as some states have already done, and the victims are the people who can no longer use the convenience of these services that were once down the street. There is evidence that many Americans living near a state border, drive out of the state without payday lenders into the states that have them. If Reps. Garcia and Grothman have their way, Americans won’t even have the option of doing that anymore. It’s a law that only the loan shark could love.

Who will then fill in when these businesses go under? You know.

This is just another way of getting the working poor and lower middle class dependent on government handoouts. That and it promotes unionization of low paying jobs. 

Why a Republican would attach his name to this is beyond me.

Payday loan companies provide a very useful service to the community, and do not extort or intimidate people. Putting them out of business WILL empower organized crime; people will have to go to loan sharks for the kinds of loans they are receiving now from these institutions.

This is just another example of the Washington worldview, where everything is under their thumbs and America is centralized.

Posted by: Timothy Birdnow at 10:48 AM | Comments (4) | Add Comment
Post contains 591 words, total size 5 kb.

1 The practice of endlessly "rolling over" these payday loans can be ruinous, and maybe something should be done to preclude that, but the business in and of itself is more useful than otherwise.

Posted by: Bill H at December 04, 2019 11:53 AM (vMiSr)

Posted by: Noah Backlink at December 04, 2019 03:36 PM (VQIko)

3 WTF? Once more, we see that no one's money is safe when Congress is in session. During this impeachment circus some of us have complained that Congress isn't doing the job we pay it to do. Well, here's proof we were wrong -- it's still merrily screwing us.

Posted by: Dana Mathewson at December 04, 2019 10:06 PM (rIYC+)

4 Yeah Bill; it's throwing out the baby with the bathwater. What'll end up happening is people will go to the casino to try to win the money they need.

Or they'll go to a loan shark.

Amen to THAT Dana!

Posted by: Timothy Birdnow at December 05, 2019 07:39 AM (pMkMt)

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