A payday lender by any name is still a loanshark

Image by BenedictFrancis via Flickr

Okay, they probably don’t break the legs of scofflaws. But they are still usurers of the worst sort. They prey on people who can barely make ends meet, and they basically rope them into a lifetime of indebtedness. By some estimations, the interest they charge amounts to an annualized 400 percent.

This of course has been true since before we were all born. Language counts for a lot in this country — call a loanshark a payday lender, and he’s not only legal, he’s protected by law.

But somehow, I never thought of the payday lenders as an organized industry. I guess I really did think of them as non-violent usures, maybe a few steps lower than pawnbrokers, but mainly running ma-and-pa shops that prey on the neighborhood poor.

So I was stunned and horrified to discover that, in fact, they are a deep-pocketed cohesive force that is lobbying like mad to pull the teeth of pending consumer protection legislation.

Under the proposal agreed to by Mr. Dodd and Mr. Corker, the new consumer agency could write rules for nonbank financial companies like payday lenders. It could enforce such rules against nonbank mortgage companies, mainly loan originators or servicers, but it would have to petition a body of regulators for authority over payday lenders and other nonbank financial companies.

Consumer advocates said that writing rules without the inherent power to enforce them would leave the agency toothless.

What possible rationale could a legislator offer for exempting from regulation an industry that is the epitome of the type of behavior that makes us need new regulation in the first place? I mean, he/she can’t come out and publicly say he/she is doing it in return for campaign contributions.

The industry’s trade group, of course, insists payday lenderss are valuable citizens, contributing billions to the economy each year. Uh huh — and where are those billions coming from? The pockets of people who then take it right back in the form of safety nets and services. Rob from the poor, give to the rich, let the taxpayers save the poor.

The horrible part is, the industry doesn’t even seem embarrassed. When Congress proposed that the interest rates it charges be capped at a maximum 36 percent annual rate, it warned — WARNED!!! — that if the cap is adopted, its profits will plunge.

The industry says a cap would be devastating to its profitability.

On Monday, the nation’s largest payday lender, Advance America of Spartanburg, S.C., said in a filing to the Securities and Exchange Commission that “any federal law that would impose a national 36 percent A.P.R. limit on our services, if enacted, would likely eliminate our ability to continue our current operations.”

And we should care…why? I think preventing them from continuing their current operations is one of the best ideas to come out of Washington in a real long time.