Big Brother’s regulators are out to kill the payday loan industry that serves millions of Americans. The welfare state wants no rivals for the loyalty of low-income people.
Low-income people are the fuel that Big Brother government burns to keep itself going. Trapping people in welfare assures their votes for the Obama’s, Clinton’s, Pelosi’s and other big spenders.
But Big Brother has to shift the blame and eliminate competitors, namely anyone else who might help low-income people. With no other options, low-income folks will turn to government and fall into the welfare trap.
One example was when Obamacare pushed millions out of limited but affordable insurance plans. A new example is the vilifying of the payday loan industry. An estimated 12-million Americans are its customers. The bureaucrats of the CFPB (Consumer Financial Protection Board) may soon kill this industry with about-to-happen regulations.
CFPB’s over-the-top rhetoric labels these loans as “debt traps” and condemns fees that if converted to annual percentage rates would reach 300 percent — if the loan actually were for a year. Their fees and interest rates reflect the risks that they take. And similar APR’s can be calculated from the late fees charged by landlords, schools, banks, credit card companies, and others.
Customers in a bind know that a $50 fee for them a two-week $500 payday loan might be cheaper and better than the ripple effects of alternatives. For example, writing an insufficient funds check can generate a $35 bank overdraft charge PLUS a $50 returned check charge, PLUS late fees from a landlord, college tuition, or credit card company, PLUS a hit on your credit report, PLUS potential criminal charges for writing a bad check.
CFPB scapegoats payday loans, calling them a trap for borrowers who rollover loans again and again. But the same problems exist with revolving credit cards and other borrowings. CFPB never notices that private borrowing is chicken feed compared to our $18-trillion national debt, which exceeds $60,000 per person and $150,000 per taxpayer. CFPB also spends $600-million a year on its own operations.
The “trap” of private borrowing is peanuts compared to the welfare trap that now ensnares 52-million Americans, one in every five. As documented by Pennsylvania’s Department of Welfare Services, “a single mom is better off earning gross income of $29,000 with $57,327 in net income and benefits than to earn gross income of $69,000.” That occurs because public assistance benefits are stacked up—things like Medicaid (expanded by Obamacare), food stamps, the mis-named Earned Income Tax Credit, housing subsidies, and so forth.
CFPB and liberals divert our attention from the welfare trap by scapegoating the private lenders who take a chance on low-income people.
Incredibly, one pending CFPB regulation says lenders must document that their borrowers “possess the ability to re-pay.” Just think that through. Lenders already evaluate ability to re-pay: If they think sthey cannot collect, they don’t make the loan. Piling on more red tape to document this makes lending more expensive, drying up the availability of loans. Yet the Left tells us that people are victims if private industry loans them too much money. Strangely, they never apply this philosophy to overly-generous government giveaway programs.
The industry trade group, Online Lenders Alliance, wrote CFPB recently to warn that paperwork requirements of collecting, verifying and retaining documents about ‘ability to re-pay’ will drive the cost of lending so high that lenders will be driven out of the market.
That will leave 12-million people with nowhere to turn, except to the government welfare trap. Or Joe the Loan Shark and his merry band of leg-breakers.
One threatened lender is Cashland, which has 13 locations in Oklahoma, Missouri and New Mexico. Cashland CEO Samantha Bentson recalls being “stunned by the CFPB’s proposal. As written, it could put me out of business, cost 45 employees their jobs, and eliminate credit options for thousands of people.”
The pattern is everywhere: Government red tape is making prices of consumer goods and services skyrocket. That includes medical insurance, electric bills, refrigerators, dishwashers, washers and dryers and other appliances, plus college tuition, automobiles, and a horde of other items. The fast-growing list is being documented online by Americans For Less Regulation, at www.AmericansForLessRegulation.com.
As the welfare state keeps growing, it tries to ban its competition from helping low-income people. Coupled with regulations that stifle job creation, the unspoken goal is to increase dependence on government. That leads recipients to support the politicians who promote giveaways.
It is a good thing when people learn tough lessons by paying extra for not becoming self-reliant. It is a bad thing when they are rewarded instead.
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